On Wednesday, the Indian Rupee (INR) faced headwinds in sustaining its recovery momentum, largely due to heightened demand for the US Dollar (USD) from importers and speculation surrounding the US Federal Reserve’s rate policies. However, positive signals from local equities and a buoyant outlook for the Indian economy offer potential support to the INR, potentially curbing further upside for the currency pair in the short term.
A recent survey released on Tuesday highlighted the robustness of India’s business activity, with April witnessing its most vigorous expansion in nearly 14 years, fueled by robust demand. The report underscored India’s positioning as the fastest-growing major economy this year, following a string of impressive growth in recent quarters.
Market focus for the week includes the release of US March Durable Goods Orders on Wednesday, with anticipation building for the US preliminary Gross Domestic Product (GDP) Annualized for the first quarter later in the week, expected to show a growth rate of 2.5% in Q1. Additionally, investors will closely monitor Friday’s final reading of the US March Personal Consumption Expenditures Price Index (PCE), which is poised to be a focal point.
In terms of market movers, India’s HSBC Manufacturing Purchasing Managers Index (PMI) for April held steady at 59.1, matching March’s figure, while the Services PMI climbed to 61.7 from the previous reading of 61.2. Notably, the strong performance across both sectors, driven by increased new orders, propelled the composite output index to its highest level since June 2010, as highlighted by Pranjul Bhandari, HSBC’s chief economist for India.
Conversely, in the US, the flash S&P Global Composite PMI for April declined to 50.9 from 52.1, signaling continued expansion but at a slower pace than in March. The S&P Global Manufacturing PMI dropped to 49.9 from 51.9, falling short of estimates, while the Services PMI decreased to 50.9, worse than anticipated.
Furthermore, US New Home Sales surged 8.8% month-on-month in March to a seasonally adjusted annual rate of 693,000 units, reaching the highest level since September 2023.
From a technical perspective, the longer-term bullish trend for USD/INR remains intact, with the pair trading above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) sits below the 50.00 midline, suggesting the possibility of further consolidation or downside before any near-term appreciation in USD/INR.
Key levels to watch include immediate resistance at 83.50, followed by 83.72 and 84.00. Conversely, initial support lies in the 83.10–83.15 range, reinforced by the 100-day EMA and a low from April 10, with potential downside targets at 82.78 and 82.65.
