The Indian Rupee (INR) traded stronger on Monday, buoyed by a weakening US Dollar (USD) amidst rising speculations of a Federal Reserve easing move in September. Despite the USD’s recent downturn, high demand for the Greenback, especially for defense and oil payments, may exert some selling pressure on the INR. However, the downside for the INR might be mitigated by potential Reserve Bank of India (RBI) interventions aimed at preventing a sharp depreciation.
Market participants are also keeping an eye on several key economic indicators from the United States. The Chicago Fed National Activity Index for June is due on Monday. Later in the week, traders will focus on the preliminary US S&P Global Purchasing Managers Index (PMI) for July, the second-quarter Gross Domestic Product (GDP), and the Personal Consumption Expenditures Price Index (PCE) for June, scheduled for release on Wednesday, Thursday, and Friday, respectively. In India, the upcoming Union Budget on Tuesday is a significant event for market watchers.
Daily Digest Market Movers: Indian Rupee Edges Higher Amid Softer US Dollar
The Indian Rupee closed at a record low of 83.6625 against the US Dollar on Friday, with likely intervention by the RBI to curb further losses. The currency declined 0.1% for the week, according to Reuters. India’s equity benchmark, BSE Sensex, fell by 739 points, or 0.91%, to 80,605 on Friday. The Nifty index also dropped, closing at 24,531, down 270 points, or 1.1%, from its previous close.
“We expect the Rupee to trade with a slight negative bias on weak global markets and a strong US Dollar. Weak Asian and European currencies may also weigh on the Rupee,” said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
New York Federal Reserve President John Williams stated on Friday that an interest rate cut could be justified in the coming months, though not at the July policy meeting, according to the Wall Street Journal. Financial markets are now pricing in less than a 5% probability of a rate move at the July meeting, with a September rate cut nearly fully anticipated, based on the CME FedWatch Tool.
Technical Analysis: USD/INR Keeps Bullish Vibe in the Long Term
The Indian Rupee trades firmer today. The USD/INR pair has confirmed a breakout above its month-long trading range while maintaining above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the upward momentum is supported by the 14-day Relative Strength Index (RSI), which is pointing higher above 63.60, suggesting further upside potential.
The immediate resistance level for the USD/INR pair is at the all-time high of 83.77, with a critical hurdle at the 84.00 psychological level. On the downside, the resistance-turned-support level at 83.65 acts as an initial contention level, followed by 83.51 (the low of July 12) and 83.40 (the 100-day EMA).
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