The Indian rupee is likely to consolidate near 40.40 per dollar short-term but longer term indicators remain bullish and a close past 40.40 would signal further gains, Goldman Sachs said.
The rupee hit a nine-year high of 40.60 this week, according to Reuters data, and in a client note, Goldman said the bear wave in dollar/rupee was a strong trend and that 40.40 was the target following a break of 42.23 in April.
"We would expect to see some short-term consolidation around this (dollar) support (40.40) as short dollar positions are lightened," technical analyst Kevin Edgeley wrote.
He said weekly and monthly indicators remained longer-term dollar bearish but daily momentum had slowed. Corrective dollar rallies were likely to meet renewed selling pressure although a break back past 42.23 would be a trend reversal signal.
"A close below 40.40 would signal further downside acceleration and a new target at the 38.00-38.40 area," he said. The rupee was last at 38 per dollar in late 1997. Separately, ING said in a note it also expected a period of dollar/rupee consolidation after its rapid move lower.
The central bank intervened between November and early March to curb rupee gains but appeared to have held off in April, and ING said it was unlikely to stay out of the market for long.
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