The Indian Rupee (INR) experienced a downturn on Tuesday, despite a softer US dollar (USD). Speculative activity has slowed as investors adopt a cautious stance ahead of India’s general elections on June 4. Additionally, the surge in crude oil prices has exerted selling pressure on the INR, given India’s status as the world’s third-largest oil importer and consumer.
Investor attention will be closely focused on the release of India’s Gross Domestic Product (GDP) for the fourth quarter of 2023 on Friday. Projections suggest a moderation to 6.7% from the previous reading of 8.4%. Any deviation from these expectations could impact the Indian Rupee negatively. Meanwhile, the final reading of the Personal Consumption Expenditures Price Index (PCE) for April in the US will also be scrutinized on Friday. Higher-than-anticipated inflation data could diminish expectations of Federal Reserve rate cuts, thereby bolstering the Greenback.
In market movements, Indian equity indices witnessed robust gains, with BSE Sensex and Nifty 50 reaching new record highs before concluding the session in negative territory. Despite adverse foreign fund flows in most emerging markets, India continues to attract significant investments, driven by strong ETF inflows and positive investor sentiment, as highlighted in research by Kotak Institutional Equities (KIE).
However, India’s economy is projected to witness its slowest growth in a year during the first quarter, attributed to weakened demand, according to a Reuters poll.
Amidst global developments, officials in Gaza reported casualties from an Israeli airstrike, prompting calls from international leaders to enforce a World Court order to halt Israel’s attacks.
Investors have adjusted their expectations, pricing in 34 basis points (bps) of Federal Reserve rate cuts over 2024, down from nearly 50 bps earlier this month.
Technical analysis reveals a bearish trend for the USD/INR pair on the daily chart. Following a break below the neckline of the Head and Shoulders pattern, the pair maintains a downward trajectory, supported by trading below the key 100-day Exponential Moving Average (EMA) and a bearish 14-day Relative Strength Index (RSI).
Potential resistance levels for USD/INR include the support-turned-resistance level and the 100-day EMA at 83.20. Further rallies could target levels at 83.54, 83.72, and the psychological level of 84.00.
Conversely, a decisive break below the 83.00 mark may lead to downside movement towards targets at 82.78 and 82.65.
