The Indian Rupee (INR) continued its downward trajectory on Thursday, even as the US Dollar (USD) weakened. Domestic equity market declines, influenced by global economic cues, exerted pressure on the INR, pushing it toward historic lows. However, potential intervention by the Reserve Bank of India (RBI) through USD sales might prevent the INR from breaching the 84 mark. Additionally, falling crude oil prices could mitigate the INR’s losses, given India’s status as the world’s third-largest oil consumer and importer.
Attention will turn to the US ISM Services Purchasing Managers Index (PMI) due later on Thursday, which is expected to decrease to 51.1 in August from 51.4 in July. On Friday, the focus will shift to the US Nonfarm Payrolls (NFP) report for August, which may provide insights into the Federal Reserve’s likely rate cut decisions for the remainder of the year.
Daily Digest Market Movers: INR Remains Vulnerable Ahead of US Economic Data
The INR was anticipated to strengthen slightly from Wednesday’s rate of 83.96 to 83.92 in one month and 83.75 in three months, according to a Reuters poll. The HSBC India Services PMI improved to 60.9 in August from 60.3 in July, surpassing the market consensus of 60.4, and reaching its highest level since March.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted, “The Indian rupee was once again stopped near 83.9750, its lowest closing, possibly by the RBI as it sold dollars to prevent the currency from breaching the psychological 84.00 level. Risk-off sentiments ensured continued dollar purchases by the market and RBI’s intervention.”
The US Job Openings and Labor Turnover Survey revealed a decline in available positions to 7.67 million in July, down from 7.91 million (revised from 8.1 million) in June and below the expected 8.1 million. Atlanta Fed President Raphael Bostic stated readiness to start cutting interest rates despite inflation remaining above the Fed’s target. Markets are now pricing in a nearly 57% chance of a 25 basis points (bps) rate cut by the Fed in September, with a 43% probability of a 50 bps reduction, according to the CME FedWatch tool.
Technical Analysis: USD/INR Outlook Remains Positive
The Indian Rupee softened on Thursday. Technical analysis of the USD/INR pair shows it remains within an ascending triangle formation. The pair maintains a positive outlook as it trades above the 100-day Exponential Moving Average (EMA), with the 14-day Relative Strength Index (RSI) positioned above the midline at 59.55.
Resistance is observed around the 84.00-84.05 region, including the psychological 84.00 level, the upper boundary of the triangle, and the high from September 4. Sustained trading above this level could potentially push USD/INR towards 84.50.
On the downside, the ascending triangle support near 83.90 provides initial support for the pair. A break below this level may lead to a test of the 100-day EMA at 83.63.
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