The Indian Rupee (INR) encountered selling pressure on Thursday despite the weaker US Dollar (USD). This pressure was partly due to the continued recovery in crude oil prices, significant for India as the world’s third-largest oil consumer. However, the downside for the INR may be constrained by rising expectations of a September rate cut by the US Federal Reserve (Fed), which could weaken the Greenback and lower US bond yields.
Key economic indicators set for release later on Thursday include the weekly Initial Jobless Claims and the Philly Fed Manufacturing Index. Additionally, comments from the Fed’s Lorie Logan are anticipated, with dovish remarks likely to further undermine the USD in the near term.
Market Movers: Global Factors Impacting the Indian Rupee
The International Monetary Fund (IMF) recently revised its economic forecasts upward for China, India, and Europe. India’s economy is now expected to grow by 7%, up from the 6.8% projected in April, driven by stronger consumer spending in rural areas.
Fed Governor Christopher Waller noted on Wednesday that the US central bank is nearing an interest rate cut, citing an improved inflation trajectory and a more balanced labor market. Richmond Fed President Thomas Barkin echoed this sentiment, expressing optimism about the broadening easing of inflation.
US economic data showed positive trends, with Building Permits rising by 3.4% to 1.446 million in June, and Housing Starts increasing by 3.0% to 1.353 million. Additionally, US Industrial Production climbed 0.6% month-on-month in June, surpassing expectations of a 0.3% increase.
Technical Analysis: USD/INR in Consolidation
The Indian Rupee traded softer on the day, with the USD/INR pair exhibiting a bullish trend characterized by higher highs and higher lows. The pair remains above the key 100-day Exponential Moving Average (EMA) on the daily chart, and the 14-day Relative Strength Index (RSI) indicates potential further upside, pointing higher above 57.35.
In the short term, USD/INR has been confined within a trading range since March 21. A decisive break above the upper boundary of this range at 83.65 could pave the way to the all-time high of 83.75, with the next significant resistance at the psychological level of 84.00.
Conversely, the initial downside target lies near the 100-day EMA at 83.38. Further declines could see the pair drop to the lower limit of the trading range at 83.00, followed by the January 12 low of 82.82.
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