On Tuesday, the Indian Rupee (INR) saw a weakening trend despite the softer stance of the US Dollar (USD). This decline in the INR’s strength was attributed to lingering uncertainty surrounding the official outcome of India’s general elections. Early counting trends from the polls indicated that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) might not secure a decisive majority as previously projected by exit polls over the weekend. However, the potential for a third consecutive victory for the BJP-led government could instill confidence among investors, potentially bolstering the Indian Rupee.
Moreover, factors such as risk appetite and a downturn in crude oil prices continued to provide support to the INR, given India’s significant position as the world’s third-largest consumer of oil.
Looking ahead, market attention is focused on the release of India’s HSBC Services Purchasing Managers Index (PMI) and the US ISM Services PMI for May on Wednesday. However, the highlight of the week will be the Reserve Bank of India’s (RBI) monetary policy announcement, coupled with the US Nonfarm Payrolls report scheduled for Friday. Stronger-than-expected economic data from the US could potentially lend support to the Greenback, thereby limiting the downside for the USD/INR pair.
In the realm of market analysis, technical indicators suggest a bearish outlook for the USD/INR pair. The crossing below the key 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) remaining below the 50-midline on the daily timeframe indicate a favorable environment for further downside movement.
Potential support levels for the pair are identified at the 82.90–83.00 region, marking the lower boundary of a descending trend channel established since mid-April, in addition to psychological support. A decisive breach below this level could see the pair declining to January 15’s low at 82.78, followed by March 8’s low at 82.65.
Conversely, resistance is anticipated near the 100-day EMA at 83.20, with a break above potentially leading to further upside towards the upper boundary of the descending trend channel at 83.40. Further resistance levels lie near April 17’s high at 83.72, ultimately targeting the psychological threshold of 84.00.
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