Bullish bias likely to continue in dollar-rupee, may head towards 72.40-72.70
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Traders expect the positive bias in the dollar-rupee to continue this week, with the Indian unit trading in a 71.40-72.40 range. Since October, the currency pair has been trading sideways and has shown decent consolidation at its 20-DMA (Day Moving Average), which acts as an equilibrium for prices in the short term.
A breakout after such consolidation suggests that the up move is likely to continue further till its previous intermediate top of Rs 72.40. The downside base has shifted upward to Rs 71.30 and any dip above this level is likely to be bought into.
RSI has started trending towards the bullish zone after two months of consolidation and prices are trading above all major medium and short term moving averages. Average directional index (ADX), which has been trading almost flat for the last few weeks, has now started sloping upwards, suggesting a new trending move is likely to take place.
On the weekly charts, bulls seem to have an upper hand. Prices have given a breakout by breaching their downward sloping trend line. Weekly RSI too suggests initial signs of a bullish breakout.
Given the breakout in the dollar-rupee, any dip is likely to act as a buying opportunity. Hence, we suggest adopting a ‘Married put’ strategy. Traders can go long in November futures at Rs 71.86 and buy a put option of 71.25 strike price at 0.025 paise. The long put will act as a stop loss in case of any fall. On the upside, traders can expect a target of Rs 72.40 and even Rs 72.70/$ . The strategy would help traders reap maximum benefits of the breakout with limited downside risk.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.