The Indian Rupee (INR) edged lower on Friday, primarily due to a modest rebound in the US Dollar (USD). The decline in INR was further exacerbated by global risk aversion amid escalating geopolitical tensions in the Middle East, which dampened market sentiment. Additionally, ongoing weak domestic market conditions and foreign capital outflows are likely to put further pressure on the local currency in the near term.
Conversely, falling crude oil prices could offer some support to the INR, as India is one of the world’s largest crude oil importers. Speculation about a potential US Federal Reserve (Fed) rate cut in September could add selling pressure on the INR. Investors are also awaiting key data later on Friday, including the preliminary US Michigan Consumer Sentiment Index for August, Building Permits, and Housing Starts. Fed official Austan Goolsbee is also scheduled to speak.
Market Digest: INR Faces Multiple Headwinds
Recent Reserve Bank of India (RBI) surveys suggest that the Indian economy experienced a slowdown in the second quarter, with expectations of continued weakness. Meanwhile, US economic data showed mixed results: Retail Sales for July increased by 1.0% month-over-month, outperforming expectations, while Industrial Production for the same month fell by 0.6%, missing market forecasts.
The number of new unemployment claims in the US dropped by 7,000 to 227,000 for the week ending August 10, better than the anticipated 235,000. Federal Reserve Bank of St. Louis President Alberto Musalem indicated that a rate cut may soon be appropriate as inflation trends towards the Fed’s 2% target.
Technical Analysis: USD/INR Shows Bullish Momentum
The USD/INR pair remains in negative territory for the day, yet the underlying bullish trend persists. The pair continues to trade above the key 100-day Exponential Moving Average (EMA) and the 10-week uptrend line. The 14-day Relative Strength Index (RSI) stands near 64.00, indicating continued support for buyers.
The psychological level of 84.00 remains a significant resistance point. A decisive break above this level could lead to a test of the all-time high of 84.24, with further resistance at 84.50. Conversely, a breach of the uptrend line at 83.85 could result in a decline towards the 100-day EMA at 83.54, with the next support level at 83.36, the low observed on June 28.
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