The Indian Rupee (INR) experienced a decline on Friday, pressured by a stronger US Dollar (USD) amid persistent foreign fund outflows and elevated crude oil prices. The impact of hotter-than-expected US inflation data and hawkish remarks from Federal Reserve (Fed) officials further contributed to the INR’s downward trajectory.
Despite these challenges, potential foreign exchange interventions by the Reserve Bank of India (RBI) are expected to help mitigate the Rupee’s losses. Market participants are now focusing on upcoming economic indicators, including the US Producer Price Index (PPI) for September and the preliminary Michigan Consumer Sentiment Index for October. On the domestic front, India is set to release data on Industrial Production and Manufacturing Output.
Market Overview: Indian Rupee Faces Multiple Challenges
FTSE Russell announced on Tuesday that Indian sovereign bonds will be included in its Emerging Markets Government Bond Index (EMGBI), following similar actions by JP Morgan and Bloomberg Index Services.
The US Consumer Price Index (CPI) for September rose by 2.4% year-over-year, slightly lower than August’s 2.5% but exceeding estimates of 2.3%. Core CPI increased by 3.3% year-over-year, surpassing both forecasts and August’s figure of 3.2%.
New York Fed President John C. Williams stated on Thursday that the monetary policy is expected to move toward a more neutral stance in the coming months, reflecting ongoing progress toward price stability. Chicago Fed President Austan Goolsbee indicated he is not overly concerned about the September inflation report, suggesting that the Fed has shifted its focus beyond solely price pressures. Meanwhile, Atlanta Fed President Raphael Bostic expressed openness to pausing rate changes if data warrants.
Technical Analysis: Bullish Outlook for USD/INR
The INR remains on the back foot, with the USD/INR pair maintaining a bullish trend. The pair is positioned above a descending trend line and the key 100-day Exponential Moving Average (EMA), suggesting continued upward momentum. The 14-day Relative Strength Index (RSI) is also above the midline at approximately 59.15, indicating support for buyers in the near term.
The psychological level of 84.00 serves as a key resistance point for USD/INR. A decisive break above this threshold could open the path to the all-time high of 84.15, with potential moves toward 84.50.
On the downside, initial support is found at 83.90, which has transitioned from a resistance level. The next support level is near the 100-day EMA at 83.68, followed by the round number of 83.00, representing a significant low from May 24.
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