On Thursday, the Indian Rupee (INR) sustained its downward trajectory, propelled by persistent demand for the US Dollar (USD) from importers and uncertainties surrounding India’s elections. Additionally, foreign outflows from Indian equities have further contributed to the INR’s decline. Market participants remain vigilant as India’s general elections, spanning several weeks, approach their culmination on June 4. Analysts speculate that a victory for Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) could attract buyers, given expectations of continued pro-growth policies.
Key economic indicators to watch include the second estimate of the US Gross Domestic Product (GDP) for Q1 2024, set for publication on Thursday. Attention will also turn to the US Core Personal Consumption Expenditures Price Index (Core PCE) for April and India’s GDP figures for the last quarter of the fiscal year (Q4 FY24) on Friday.
The recent slide in the Indian rupee has been exacerbated by month-end USD purchases by oil importers, according to Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm. Despite this, S&P Global Ratings has maintained India’s sovereign rating while upgrading its outlook from ‘stable’ to ‘positive’, underscoring the country’s robust economic fundamentals. However, concerns about the upcoming election have prompted foreign investors to sell approximately $2.8 billion of Indian equities in May.
Federal Reserve Atlanta President Bostic remarked on Thursday that the central bank still has work to do to address significant price growth witnessed over recent years. The Fed‘s Beige Book released Wednesday noted a slight or modest expansion in US economic activity, with consumers pushing back against higher prices since early April. Market sentiment reflects a 50% probability that the Fed will maintain interest rates in September, according to the CME FedWatch Tool.
Technical analysis indicates a bullish stance for the USD/INR pair on the daily chart, with the pair crossing above the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) suggests a bullish zone, indicating potential support around 83.0. The pair has formed a descending trend channel since mid-April, with the upper boundary at 83.40 serving as the initial upside barrier. Further upward movement could target levels at 83.54, 83.72, and eventually 84.00.
Conversely, initial support for the pair lies at the 100-day EMA at 83.20, with a crucial level at the psychological mark of 83.00. Further losses could lead to levels at 82.78 and 82.65, representing lows from January 15 and March 11, respectively.
