On Tuesday, the Indian Rupee (INR) faced pressure as demand for the US Dollar (USD) strengthened alongside higher US bond yields. Additionally, escalating crude oil prices, driven by geopolitical tensions in the Middle East, added to selling pressures on the INR. India, being the world’s third-largest oil consumer, felt the impact keenly.
Despite these challenges, optimism surrounding India’s economic outlook and substantial portfolio inflows, particularly into sovereign bonds following their inclusion in the JPMorgan emerging market debt index, are expected to support the INR. This optimism could potentially limit further depreciation of the INR against the USD.
Market watchers are eagerly anticipating Federal Reserve Chairman Jerome Powell’s speech on Tuesday for potential market-moving insights. Attention will then shift to India’s HSBC Services Purchasing Managers Index (PMI) for June on Wednesday. Positive indications of growth in the services sector could bolster the INR and act as a counterforce against ongoing pressures.
Technical analysis suggests that while the USD/INR pair remains within a familiar trading range on the daily chart, the bullish trend persists above the critical 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) indicates potential for consolidation or downward movement, given its bearish stance below the 50-midline.
Looking ahead, sustained trading above 83.65 could push USD/INR towards its all-time high of 83.75 and potentially the psychological level of 84.00. Conversely, a break below the 100-day EMA at 83.35 may see the pair testing support at 83.00, with further downside potential towards 82.82.
In summary, while immediate challenges weigh on the INR, broader economic optimism and upcoming data releases could influence a recovery scenario for the currency in the near term.
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