The Indian Rupee (INR) experienced a decline in trading on Wednesday, awaiting upcoming catalysts later in the week. The subdued Indian Services Purchasing Managers’ Index (PMI) data for February exerted selling pressure on the INR. Meanwhile, the US ISM Services PMI dropped to 52.6 in February, below January’s 53.4 and the anticipated 53.0, signaling a decrease in inflationary pressures in India.
Despite this, the Reserve Bank of India (RBI) is expected to maintain a cautious approach to monetary policy. In contrast, the Federal Reserve (Fed) is likely to precede the RBI in cutting policy rates, lending support to the INR and potentially limiting the upside of USD/INR.
Investors are closely monitoring Fed Chair Powell’s testimony on Wednesday and Thursday, seeking insights into the timing of potential interest rate cuts. Additionally, Friday’s release of US labor market data, with an estimated addition of 200,000 jobs in February and an unchanged Unemployment Rate of 3.7%, will be pivotal for market sentiment.
Market Overview: Indian Rupee Vulnerable Amid Global Factors
Recent data from HSBC Services PMI indicates the second-weakest cost pressures in the sector since August 2020 and the slowest increase in selling charges in two years. Moody’s, the global rating agency, has raised India’s 2024 GDP growth forecast to 6.8%, up from the November 2023 estimate of 6.1%. In contrast, the RBI forecasts a 7% GDP growth for FY24, while the International Monetary Fund (IMF) anticipates 6.7%.
The US ISM Services PMI slipping to 52.6 in February raises concerns, with the New Orders Index improving but the Employment Index and Prices Paid Index declining, reflecting challenges in the US services sector.
Technical Analysis: Indian Rupee Faces Resistance in a Confined Range
The technical analysis reveals that the Indian Rupee weakens against the USD, with USD/INR maintaining a range between 82.65 and 83.15 within a descending trend channel since December 8, 2023. The bearish outlook persists as the pair remains below the 100-day Exponential Moving Average (EMA) on the daily chart.
The 14-day Relative Strength Index (RSI) confirms the bearish momentum, residing below the 50.0 midline, supporting sellers. A decisive break above the crucial resistance at 83.00, which includes the 100-day EMA, may push USD/INR towards the upper boundary of the descending trend channel at 83.15, followed by targets at 83.35 and 84.00.
On the downside, initial support lies at the lower limit of the descending trend channel at 82.65. Further selling could target the bearish levels of 82.45 (a low from August 23) and 82.25 (a low from June 1).
