The Indian Rupee (INR) faced losses on Thursday, pressured by strong demand for the US Dollar (USD) from local corporations and state-run banks, coupled with higher US Treasury bond yields. Despite these pressures, the rupee’s decline may be tempered by a weaker-than-expected US ISM Services PMI report for June, which could act as a headwind for the USD.
Market Factors Influencing INR
India’s economic outlook remains optimistic, supported by a bullish trend in Indian equity markets, which helps underpin the INR. However, the closure of US markets on Thursday for Independence Day shifted investors’ focus to the upcoming US June employment data, including Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings, due on Friday.
Key Economic Data:
India’s HSBC Services PMI: The final reading for June rose to 60.5, surpassing the previous 60.2 and the market consensus of 60.4.
US ISM Services PMI: Dropped significantly to 48.8 in June from 53.8 in May, missing the expected 52.5.
US Initial Jobless Claims: Increased to 238,000 for the week ending June 29, above the estimated 235,000 and the previous 233,000.
Fed‘s Stance on Interest Rates
The Federal Open Market Committee (FOMC) meeting minutes from June 11-12 revealed a cautious approach, with officials emphasizing a data-dependent strategy before making decisions on interest rate cuts. Some policymakers highlighted the need for patience, while others indicated the possibility of further hikes if inflation rebounds. Chicago Fed President Austan Goolsbee reiterated that achieving the 2% inflation target will take time and require ongoing economic data analysis.
Technical Analysis: USD/INR Outlook
The USD/INR pair maintains a bullish trend on the daily chart, staying above the key 100-day Exponential Moving Average (EMA). The pair has been oscillating within a familiar trading range since March 21, with the 14-day Relative Strength Index (RSI) around the 50-midline, suggesting potential consolidation.
Resistance Levels:
First Upside Barrier: 83.65, the high of June 26.
Next Hurdle: 83.75, the all-time high, en route to the 84.00 psychological mark.
Support Levels:
Initial Support: 100-day EMA at 83.35.
Further Support: 83.00 round figure, followed by 82.82, the low of January 12.
Conclusion
The Indian Rupee’s performance is currently influenced by a mix of global economic factors and local market dynamics. While the USD remains strong, partly due to higher Treasury yields and corporate demand, weak US economic data and positive signals from India’s economy provide a counterbalance. Investors will closely watch upcoming US employment data and ongoing Fed policies for further direction.
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