The Indian Rupee (INR) held steady on Monday, unaffected by a weaker US Dollar (USD). Despite the softer USD, ongoing foreign outflows and strong demand for USD from Indian importers are applying pressure on the INR. The Reserve Bank of India (RBI) continues to play a stabilizing role by potentially selling USD to prevent the INR from falling below the critical 84.00 mark.
The decline in crude oil prices is expected to offer support to the INR, as India remains a major importer of oil. Market participants will be watching closely for the preliminary HSBC India Purchasing Managers Index (PMI) scheduled for Wednesday. Additionally, this Friday’s speech by Federal Reserve Chair Jerome Powell could influence the USD, with any dovish signals potentially weakening the Greenback and limiting its gains against the INR.
Market Digest: Indian Rupee Faces Mixed Influences
India’s export performance for the current fiscal year through July shows a 6% decline compared to the previous year. Foreign direct investment (FDI) in India has decreased by 3.5% in FY24, while foreign portfolio investors (FPI) have pulled out funds due to an overheated equities market.
Consumer sentiment in the US rebounded in August, with the preliminary University of Michigan Consumer Sentiment Index rising to 67.8 from 66.4 in July, surpassing the estimated 66.9. Meanwhile, US housing starts dropped by 6.8% to an annual rate of 1.238 million in July, following a 1.1% increase to 1.329 million in June. Building permits also fell by 4.0% to 1.396 million in July, down from 1.454 million in June.
Federal Reserve Bank of Chicago President Austan Goolsbee advised caution regarding prolonged restrictive monetary policies, while San Francisco Fed President Mary Daly advocated for a balanced approach to rate cuts amidst concerns of an economic slowdown.
Technical Analysis: USD/INR Maintains Bullish Trajectory
The USD/INR currency pair remains in a bullish phase, with the price trading above the 100-day Exponential Moving Average (EMA) and an 11-week uptrend line. The 14-day Relative Strength Index (RSI) is positioned above the midline at 56.80, indicating potential for continued upward momentum.
A key resistance level for USD/INR is the 84.00 psychological threshold. A break above this level could lead to a test of the record high at 84.24, with potential to reach 84.50. Conversely, if bearish momentum persists, the initial support target is the uptrend line at 83.88, with further declines possible to the 100-day EMA at 83.55, and potentially down to 83.36, the June 28 low.
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