The Indian Rupee (INR) is experiencing a modest uptick on Wednesday, buoyed by improved risk appetite following China’s recent stimulus measures and a softer US Dollar (USD). However, several factors could weigh on the INR, including rising crude oil prices, equity outflows due to adjustments in the FTSE index, and renewed USD demand from major Indian importers.
Market Drivers and Upcoming Data Releases
The market is eyeing the release of the US New Home Sales data for August later today, as well as a speech from US Federal Reserve Governor Adriana Kugler. Any dovish remarks from Fed officials could further impact the strength of the Greenback against the INR. This week’s key highlight will be the release of the US August Personal Consumption Expenditures (PCE) Price Index data on Friday, which is closely watched by investors for inflation signals.
Daily Digest: Indian Rupee Firmness Amid Global Sentiment
S&P Global Ratings has retained its forecast for India’s GDP growth at 6.8%, noting that the Reserve Bank of India (RBI) may consider interest rate cuts in October. According to Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, “We expect the rupee to trade with a positive bias amid improved global risk appetite following China’s stimulus and softness in the dollar. However, elevated crude oil and other commodity prices may cap sharp upside.”
In related news, the Conference Board’s US Consumer Confidence Index has fallen to 98.7 in September from a revised 105.6 in August, marking the largest decline since August 2021. Additionally, Fed Governor Michelle Bowman remarked that key inflation indicators remain “uncomfortably above” the 2% target, suggesting caution as the Fed continues its interest rate cuts. The CME FedWatch Tool currently indicates nearly 56% odds of a second 50 basis point rate cut in November, with a 44% chance of a 25 basis point cut.
Technical Analysis: Negative Outlook for USD/INR
The USD/INR pair is trading with a bearish sentiment as the Indian Rupee strengthens. The pair remains capped below the key 100-day Exponential Moving Average (EMA) on the daily chart, which reinforces the negative outlook. The 14-day Relative Strength Index (RSI) is below the midline near 36.00, indicating downward momentum.
Key Levels:
First downside target: 83.44 (low of September 23)
Crucial support: 83.00 (psychological level and low of May 24)
Resistance: Sustained trading above the 100-day EMA at 83.62 could lead to a test of 83.75 (previous support turned resistance).
Key barrier: 84.00 (round number resistance)
The outlook for the INR remains cautiously optimistic, but the potential for volatility exists due to external factors such as crude oil prices and shifts in investor sentiment.
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