The Indian Rupee (INR) weakened on Monday, pressured by month-end US Dollar (USD) demand from importers and potential intervention by the Reserve Bank of India (RBI). Despite these factors, strong foreign inflows and lower crude oil prices may help cushion the INR from more significant losses.
Investors are closely monitoring speeches from US Federal Reserve Chair Jerome Powell and Governor Michelle Bowman, which are expected to provide insights into the future of US interest rates. Additionally, the release of the Chicago Purchasing Managers’ Index (PMI) and the Dallas Fed Manufacturing Business Index will offer further direction. On the Indian economic calendar, the August Federal Fiscal Deficit is set to be reported later today.
Market Highlights: INR Under Pressure Amid USD Strength
The Indian rupee has maintained relative stability against the USD in 2024, depreciating by just 0.59% so far this year. Last Friday, Chief Economic Advisor (CEA) V Anantha Nageswaran projected that the Indian economy would grow at a steady rate of 6.5-7% in the current financial year.
In the US, the Personal Consumption Expenditures (PCE) Price Index rose by 2.2% year-over-year in August, down from 2.5% in July, according to data from the US Bureau of Economic Analysis. This figure was slightly below the estimated 2.3%. Core PCE, which excludes volatile food and energy prices, increased by 2.7% year-over-year, aligning with market expectations.
In another positive development for the US economy, the University of Michigan’s Consumer Sentiment Index rose to 70.1 in September, up from 66.0 in August, surpassing expectations of 69.3. Meanwhile, market futures indicate a 54% likelihood of a half-point interest rate cut by the Federal Reserve in November, with a 46% chance of a quarter-point cut, as per the CME FedWatch Tool.
Technical Outlook: INR Faces Key Resistance as USD Maintains Momentum
On the technical front, the Indian Rupee remained under pressure against the USD. The USD/INR pair continues to trade above its 100-day Exponential Moving Average (EMA), indicating a constructive bias. However, further downside for the rupee seems possible as the Relative Strength Index (RSI) hovers near 46.60, below the midline.
Immediate resistance for the USD/INR pair is seen at the 83.75 level, with the next significant barrier at the psychological 84.00 mark. On the downside, potential support is located at the 100-period EMA at 83.62. A decisive break below this level could drive the pair toward the 83.00 psychological level, which aligns with the May 24 low.
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