On Friday, the Indian Rupee (INR) showcased a partial recovery, yet potential demand for the US Dollar (USD) from foreign and state-run banks could impede a significant uptick in the pair. The Indian economy’s robust GDP growth, the government’s proactive measures to attract multinational corporations, and substantial infrastructure investments have contributed to the INR’s resilience.
India’s GDP growth, ranking highest among major economies last quarter, is anticipated to grow by 6.5% in 2024, as per the International Monetary Fund (IMF) forecast. However, factors such as the rebound in oil prices and elevated domestic inflation may exert pressure on the upside potential of the USD/INR pair.
Market attention will focus on the US ISM Manufacturing PMI Index scheduled for Friday, along with speeches from notable figures such as Fed‘s Williams, Logan, Waller, Bostic, Daly, and Kluger. A stronger-than-expected US PMI may fuel speculation about delayed interest rate cuts, providing support to the Greenback and the USD/INR.
Market Highlights:
Indian S&P Global Manufacturing PMI improved to 56.9 in February, signaling strength in the manufacturing sector.
India’s GDP for the October-December quarter of FY24 exceeded estimates, expanding by 8.4% against an expected 7.3%. The annual growth rate rose to 7.6% from 7.2%.
US Personal Consumption Expenditure (PCE) Price Index eased to 2.4% YoY, in line with expectations, while Core PCE rose by 2.8% YoY in January.
Fed officials’ statements indicate divergent views on inflation and rate cuts, with Atlanta Fed President Bostic noting a “bumpy” road to the 2% inflation target.
Technical Analysis:
Despite the INR’s strength, USD/INR remains within a descending trend channel since December 8, 2023, maintaining a range between 82.70 and 83.20. Short-term indicators, including the 100-day EMA and the 14-day RSI, suggest a negative bias. The lower limit of the channel at 82.70 serves as initial support, with further downside potential toward 82.45 and 82.25.
In a bullish scenario, the critical upside barrier lies at 83.00, supported by the 100-day EMA. Additional resistance levels include 83.35 and 84.00, with the pair currently navigating the longer-term range-bound theme.
