The Indian Rupee (INR) struggled on Tuesday, trading on a weaker note despite the decline of the US dollar (USD). While the softer Greenback and a decrease in crude oil prices offer potential support for the Indian Rupee in the short term, a recent over six-month intraday high of 82.65 faced limitations due to anticipated intervention from the Reserve Bank of India (RBI).
Economic Indicators and RBI Policy Outlook
India’s headline retail inflation is projected to ease to 5.02% in February from 5.10% in January, aligning with the Reserve Bank of India’s (RBI) tolerance range of 2-6% for the sixth consecutive month. Despite these figures, economists anticipate that the RBI will maintain the current monetary policy during its April meeting, citing the robust domestic economy and inflation consistently exceeding its 4% target.
Key Data Points Ahead
Investors are closely monitoring India’s and the US Consumer Price Index (CPI) inflation data for February, set to be released on Tuesday. Additionally, India’s Wholesale Price Index (WPI) of Food, Fuel, and Inflation is due on Wednesday, with US Retail Sales data scheduled for Thursday.
Geopolitical Factors and Foreign Reserves
The Indian Rupee remains vulnerable to high inflation and geopolitical risks. India’s foreign reserves saw a notable increase of $6.55 billion, reaching $625.626 billion in the week ending March 1, according to the RBI. Piyush Goyal, India’s Commerce and Industry Minister, highlighted the growing interest from developed and developing countries in trading with the Indian currency to reduce transaction costs.
Economic Growth and Global Perspectives
India Ratings and Research (Ind-Ra) forecasts that the Indian economy will transition to an upper-middle-income country by FY36, aiming to reach the $15 trillion mark by FY47. Meanwhile, Federal Reserve Chair Jerome Powell expressed confidence in the health of the US economy, stating that policymakers are approaching a point where they may consider cutting rates.
Technical Analysis and Outlook
Technically, the Indian Rupee (USD/INR) remains within a descending trend channel, confined between 82.60 and 83.15 since December 8, 2023. The short-term outlook is negative, supported by the pair trading below the 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) below the 50.0 midline.
Key support is identified at the lower limit of the descending trend channel at 82.60, with potential further declines to 82.45 and 82.25 upon a breakout. Conversely, resistance lies at the 83.00 mark, featuring the 100-day EMA, and further upside barriers at 83.15 and 84.00 in the event of a bullish breakout.
Investors and traders will be closely monitoring these technical indicators alongside economic data releases for potential shifts in the USD/INR exchange rate in the coming days.
