The Indian Rupee (INR) strengthened on Friday, buoyed by a combination of factors including a rebounding US Dollar (USD) and robust economic data from India’s Purchasing Managers’ Index (PMI) for June. Both the manufacturing and services sectors showed accelerated growth, with HSBC’s Manufacturing PMI rising to 58.5 from May’s 57.5, and the Services PMI climbing to 60.4 from 60.2, surpassing expectations of 60.0. This positive report contributed to a modest appreciation of the INR against the USD.
Additionally, substantial inflows into the Indian bond market ahead of India’s inclusion in the JPMorgan Emerging Market bond index later this month provided further support to the local currency. However, potential pressures on the INR include renewed USD demand from local importers, capital outflows, and concerns over the weakening Chinese Yuan. Moreover, the recent surge in crude oil prices poses a risk, given India’s significant dependency as the world’s third-largest crude oil consumer.
Investor focus remains on the Reserve Bank of India’s (RBI) Monetary Policy Committee meeting minutes, scheduled for release today. Meanwhile, in the US, attention turns to the S&P Global Purchasing Managers’ Index reports for June.
Technical Outlook for USD/INR
The USD/INR pair maintains a bullish bias in the longer term, supported by trading above the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) remains above the 50-midline, indicating continued bullish momentum.
In terms of resistance, further buying could target the all-time high near 83.75, followed by the psychological level of 84.00. On the downside, initial support is expected around 83.60, with critical support at 83.30-83.35, which includes the resistance-turned-support level and the 100-day EMA. Deeper declines might test the round figure support at 83.00.
Overall, while the INR benefits from positive economic indicators and market inflows, ongoing global economic developments and domestic factors like oil prices will influence its near-term trajectory against the USD.
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