The Indian Rupee (INR) strengthened against the US Dollar (USD) on Thursday, gaining traction as the softer USD weighed on the pair. The INR’s downside risk appears limited following the US Federal Reserve’s (Fed) significant 50 basis point rate cut at its September meeting, which may continue to pressure the USD. Additionally, persistent Foreign Institutional Investor (FII) inflows into Indian equities further bolster the local currency.
However, rising crude oil prices could challenge the INR’s recovery, given that India is the world’s third-largest oil consumer after the United States and China. Investors now await key US economic data, including Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales, due later on Thursday, which could influence the USD/INR pair’s trajectory.
Market Movers: Indian Rupee Strengthens Post-Fed Decision
The Reserve Bank of India (RBI) is expected to maintain its current benchmark policy rate throughout 2024 amid uncertainties surrounding food inflation, according to State Bank of India (SBI) Chairman C S Setty.
Finance Minister Nirmala Sitharaman highlighted India’s robust economic growth, asserting that the country stands out globally and is expected to sustain its growth momentum in the coming years.
The Federal Open Market Committee (FOMC) reduced the federal funds rate by 50 basis points to a range of 4.75% to 5.00%, marking the Fed’s first rate cut in over four years.
Fed Chair Jerome Powell clarified that the recent half-point rate cut does not signal a new policy direction but reflects the central bank’s intent to support the economy and labor market.
Fed policymakers revised their economic forecasts, raising the median unemployment projection for 2024 to 4.4% from 4.0% and increasing the long-term federal funds rate projection to 2.9% from 2.8%.
Technical Analysis: USD/INR Vulnerable as Rupee Gains Traction
The Indian Rupee is trading firmer, pushing the USD/INR pair below a key technical level on the daily chart. The pair’s bullish outlook appears fragile as it hovers near the 100-day Exponential Moving Average (EMA). A close below this level could trigger further declines, with the 14-day Relative Strength Index (RSI) positioned in the bearish zone at 38.0, indicating that the path of least resistance is to the downside.
Key technical levels for USD/INR include:
Support Levels: The 100-day EMA at 83.64 serves as the initial support. A breach here could push the pair down to 83.31, the June 18 low. Extended losses may draw further selling interest towards the 83.00 psychological level.
Resistance Levels: On the upside, the first barrier emerges at the former support-turned-resistance near 83.75, followed by a critical resistance zone at 83.90-84.00.
As traders monitor upcoming US economic data, the Rupee’s near-term strength could be influenced by further developments in the USD and global oil prices, which remain a key risk factor for the INR.
Related Topics:
