The rupee was stuck in a narrow sideways range of 68.02-68.27 in the past week. The currency closed at 68.07 on Wednesday.

This leaves intact the broader sideways consolidation range of 67.7-68.35 within which the rupee has been trading for more than five weeks now.

Neither the weak dollar nor the strong domestic equity market is helping the rupee. The dollar has been weakening against major currencies, such as the euro and the pound, over the last few weeks.

Though this is limiting the downside in the domestic currency, it is not helping the rupee to strengthen against the greenback. This is significant because if the dollar regains momentum against the major currencies, then the rupee might come under pressure.

Foreign portfolio investors continue to remain net sellers. After selling about $5.9 billion in debt and $3.9 billion in equities over the last two months, FPIs have sold $422 million and $495 million in Indian debt and equity segments, respectively, so far this month.

If the FPI sell-off intensifies, then the rupee may come under pressure, going forward.

The dollar index has tumbled 2.6 per cent so far this year. This fall has dragged the index in the past week below a crucial support at 100.68. The index is currently trading around the psychological 100 mark.

For the index, key supports remain in between 99.7 and 99.5. A strong reversal from this support zone may ease the downward pressure in the dollar index. Such a reversal may take the dollar index higher to 101.

Further break above 101 will see the upmove extending to 102 or even higher levels. On the other hand, the dollar index will continue to remain under pressure if it declines below 99.5 in the coming days. Such a fall can drag it to the 99-98.85 support zone.

The narrow sideways move in the past week leaves the outlook on the rupee unchanged. The currency may continue to retain its sideways move at least until the Union Budget next week.

At present, the psychological resistance at 68 is capping the near-term upside in the rupee. A strong break above 68 is needed for the rupee to strengthen to 67.7 — the upper end of the current range.

But the price action on the daily chart suggests that an immediate break below 68 is less probable. Also, the series of key resistances between 67.90 and 67.70 may cap the upside in the rupee even if it strengthens above 68 in the coming days.

As such, a revisit of the 68.35-68.40 resistance zone is more likely in the near term. A strong break below 68.4 can see the rupee weakening to 68.7 and 68.85 in the short term.

As reiterated in this column, the region between 68.80 and 68.85 is a crucial support zone. A strong break and a decisive weekly close below 68.85 will bring renewed pressure on the rupee and will also keep intact the medium-term bearish view.

Such a break can see the rupee testing 69 initially. Further break below 69 will drag the currency lower to 69.6 and 70.2 over the medium term.