On Thursday, the Indian Rupee (INR) retreated from earlier gains amidst renewed demand for the US Dollar (USD). The depreciation of the INR reflects persistent pressures from local importers and oil companies, intensifying their USD demands. Compounding these pressures, the rise in crude oil prices poses a significant risk, given India’s position as the world’s third-largest consumer of crude oil, trailing only the United States and China.
Despite these challenges, substantial inflows into Indian equities and bond markets offer potential support for the INR in the short term. However, speculation surrounding potential interest rate cuts by the US Federal Reserve (Fed), anticipated to commence in September 2024, may weaken the USD and provide some relief for the INR against the Greenback.
Looking ahead, market focus shifts to upcoming economic indicators. Thursday will see the release of US weekly Initial Jobless Claims, Building Permits, Housing Starts, and the Philly Fed Manufacturing Index. Meanwhile, attention will turn to Friday’s releases of India’s HSBC Manufacturing and Services PMI data, alongside US S&P Global PMI reports.
Market Overview and Analyst Insights
In market developments, Indian equity indices touched fresh record highs before settling with marginal gains. The BSE Sensex closed at 77,337.59, up 36.46 points (0.05%), while the Nifty50 ended at 23,516, down 41.90 points (0.18%).
According to Sajal Gupta, head of FX and commodities at Nuvama Wealth Management’s institutional desk, the INR could appreciate beyond 83.20 as India prepares to join the JPMorgan emerging market debt index later this month.
Furthermore, Fitch Ratings has revised India’s growth forecast upwards from 7% to 7.2%, citing recovery in consumer spending and increased investment.
Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, expects the INR to trade within the 83-83.55 band in the near term, with the Reserve Bank of India poised to intervene should sharp declines below 83.55 occur.
Technical Analysis of USD/INR
Technically, the USD/INR pair exhibits a bullish stance in the longer term, maintaining above the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) suggests a neutral outlook, supporting potential consolidation.
In case of further upside, initial resistance levels include 83.55 (June 18 high), followed by 83.72 (April 17 high) and the psychological level of 84.00.
Conversely, key support resides near 83.30, represented by the 100-day EMA. Sustained selling below this level could push the pair towards 83.00 and 82.78, respectively.
This comprehensive overview underscores the complex dynamics influencing the USD/INR pair, balancing global economic indicators with local market trends and technical analysis insights.
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