The Indian Rupee (INR) exhibited strength on Monday, benefitting from a decline in the US Dollar (USD) and bolstered by a positive economic outlook for India. According to the International Monetary Fund’s (IMF) latest World Economic Outlook update, India’s economic growth is projected to remain robust at 6.5% in both 2024 and 2025.
While Japan faces an unexpected recession, India stands out as a ‘bright spot’ on the global economic map. The IMF forecasts indicate that India is poised to surpass both Japan and Germany in terms of economic output in 2026 and 2027, respectively. However, potential geopolitical tensions in the Middle East and economic headwinds may restrain the upward momentum of the INR and exert downward pressure on the currency pair.
With US markets closed on Monday due to the President’s Day holiday, market participants are anticipated to focus on the release of the Federal Open Market Committee (FOMC) Minutes from the January meeting on Wednesday. Attention will then shift to India’s S&P Global Services PMI and Reserve Bank of India (RBI) MPC Meeting Minutes on Thursday.
Indian Rupee Resilient Amid Geopolitical Tensions and Headwinds
Despite geopolitical tensions and various headwinds, the Indian goods trade deficit narrowed by nearly 12% in January compared to the previous month. The trade deficit decreased to $17.49 billion in January from $19.80 billion in December. Import figures fell to $54.41 billion from $58.25 billion in December, while exports saw a modest decline to $36.92 billion from $38.45 billion in December, attributed to the geopolitical conflict in the Red Sea.
In the United States, the Producer Price Index (PPI) for January recorded a 0.3% month-on-month increase, rebounding from a 0.1% decline in December. The PPI figure rose by 0.9% year-on-year, surpassing market expectations. However, US Housing Starts fell by -14.8% from 1.562 million to 1.331 million, and Building Permits slumped -1.5%, down from the previous reading of 1.8%. Meanwhile, the Michigan Consumer Sentiment Index improved to 79.6 in February, slightly above January’s reading of 79.0, albeit below market consensus.
Technical Analysis: Indian Rupee Witnesses Upward Movement within Longer Band
The Indian Rupee has demonstrated strength against the US Dollar, trading within a descending trend channel of 82.70–83.20 since December 8, 2023. In the short term, the USD/INR pair maintains a bearish bias as it remains below the key 100-period Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) holding below the 50.0 midline indicates a downward path of least resistance.
The immediate resistance for the pair is near the February 14 high at 83.10, with a crucial upside barrier at the upper boundary of the descending trend channel (83.20). Further buying above 83.20 could lead to a high of January 2 at 83.35, followed by the psychological level of 84.00.
On the downside, initial support is observed near the February 2 low of 82.83, followed by the lower limit of the descending trend channel at 82.70 and a low of August 23 at 82.45.
