On Monday, the Indian Rupee (INR) experienced a decline as the US Dollar (USD) rebounded, signaling a potentially quiet session as traders adopt a cautious stance leading up to the Federal Open Market Committee (FOMC) policy meeting and India’s federal budget presentation later in the week.
The strength of the US Dollar and rising US bond yields, fueled by positive economic indicators and reduced expectations of aggressive rate cuts by the Fed, have impacted the INR negatively. Additionally, ongoing geopolitical tensions in the Middle East are contributing to increased demand for safe-haven currencies, favoring the USD/INR pair.
Investors are closely monitoring the FOMC meeting scheduled for Wednesday, with expectations that the committee will maintain the current policy. The subsequent press conference by Fed Chairman Jerome Powell could influence the USD’s trajectory, particularly if any hints of a potential rate cut in March are provided.
India’s Finance Minister, Nirmala Sitharaman, is set to present the Interim Budget 2024 for the fiscal year 2024–25 on Thursday, focusing on initiatives aimed at sustaining India’s growth towards a $5 trillion economy.
The market outlook for the Indian Rupee remains sensitive to global factors, as evidenced by India’s 10-year benchmark bond yield holding steady at 7.1760% on Friday. The forthcoming fiscal budget is anticipated to emphasize government spending, with a focus on narrowing the fiscal deficit to 5.30% of GDP in 2024–25 from the current 5.90%.
Technical analysis reveals that the USD/INR pair is confined within a descending trend channel, trading on a softer note. The presence of the pair above the key 100-period Exponential Moving Average (EMA) suggests potential upside. The 14-day Relative Strength Index (RSI) above the midline further indicates a momentum biased towards the upside.
Immediate resistance is identified at the upper boundary of the descending trend channel at 83.25, with a potential bullish breakout targeting levels of 83.35 and 83.47. On the downside, support is anticipated in the 83.00-83.05 region, marked by the confluence of the 100-period EMA and a psychological level. A bearish downswing could see the pair testing December 18’s low at 82.90, progressing towards the lower limit of the descending trend channel at 82.72.
