The Indian Rupee (INR) witnessed a slowdown in its recovery momentum on Wednesday, attributed to the modest resurgence of the US Dollar (USD). Market sentiments turned cautious ahead of the anticipated release of key US inflation data, expected to reveal elevated inflation figures. Despite this, USD sales from foreign and state-run banks, coupled with lower crude oil prices and promising growth prospects in the Indian economy, offered some support to the INR, potentially capping the upside of the USD/INR pair.
Wednesday’s highlights include the release of the US March Consumer Price Index (CPI) report and the Federal Open Market Committee (FOMC) Minutes, which could provide insights into the trajectory of inflation and the Federal Reserve’s monetary policy direction. Meanwhile, attention in the Indian market will shift to the forthcoming Eid al-Fitr holiday on Thursday, with focus returning on Friday to the Indian CPI inflation report for March and Industrial Production for February.
In other market news, India’s eight states are poised to have an economy surpassing $1 trillion as the country progresses towards its goal of becoming a developed nation by FY47, according to a report by India Ratings and Research (Ind-Ra). Reserve Bank of India (RBI) Governor Shaktikanta Das acknowledged that inflation is inching closer to targets, projecting retail inflation for the current year at 4.5%, despite ongoing uncertainties in food prices. Das emphasized that India’s robust growth prospects afford the central bank the latitude to maintain its focus on inflation.
Commenting on the US economic landscape, Chicago Fed President Austan Goolsbee remarked on the strength of the recent jobs report, while urging caution regarding the sustainability of the current interest rate stance. Minneapolis Fed President Neel Kashkari noted a cooling in the labor market’s fervor but underscored ongoing tightness, expressing confidence in a gradual easing of inflationary pressures.
According to the CME’s FedWatch tool, the likelihood of a rate cut in June has diminished to nearly 57%, with the odds of a July cut dropping below 75%.
Technical Analysis: USD/INR Maintains Positive Outlook in Long Term
The Indian Rupee softened against the US Dollar on the day, with USD/INR continuing its bullish trajectory in the long term, having breached a descending trend channel dating back almost four months since March 22.
In the near term, USD/INR remains above the critical 100-day Exponential Moving Average (EMA) on the daily timeframe, with the 14-day Relative Strength Index (RSI) above the 50-midline, suggesting that support zones are more likely to hold than to yield.
Key support is anticipated near the convergence of the psychological round mark and the 100-day EMA at the 83.00–83.50 region, with further downside potential indicated by the March 14 low at 82.80, followed by the March 11 low at 82.65. Conversely, upside targets include the April 2 low at 83.30, followed by the April 5 high at 83.45, en route to an all-time high of 83.70.
