The Indian rupee has been stuck inside a narrow range for almost two weeks now. The domestic currency has been oscillating between 88.52 and 88.76. Within this range, it has closed at 88.61 against the dollar on Tuesday.
Dollar outlook
The rupee has stayed stable despite the recent fall in the dollar index (99.60). The dollar index fell from around 100.35 to 99 in the first half of this month. However, the index has been attempting to bounce back over the last couple of days.
Immediate support is around 99.40. If the index manages to sustain above it, the bias will remain positive. IN that case, a rise to 100 can be seen in the near term. A decisive break above 100 can then take the dollar index higher towards 100.80-101 in the short term.
This rise in the dollar index could be negative for the domestic currency. It could keep the rupee vulnerable, breaking the current range on the downside and weakening against the dollar.
The dollar index has to decline below 99 decisively in order to fall towards 98.50-98.
Rupee outlook
As mentioned above, the rupee is currently stuck between 88.52 and 88.76. Support for the rupee is at 88.80. Resistance is at 88.45. So, 88.45-88.80 can be a wider trading range for some time. A breakout on either side of 88.45 or 88.80 will then determine the next leg of the move.
A break above 88.45 will be bullish. It can take the rupee higher to 88. On the other hand, if the rupee declines below 88.80, it can come under renewed pressure. In such a scenario, the rupee can weaken towards 89.20-89.30 against the dollar.