The Indian Rupee (INR) fell to an all-time low on Friday, impacted by significant foreign fund outflows, a downward trend in domestic equities, and a recent surge in crude oil prices. Additionally, increasing expectations that the Federal Reserve will adopt a less aggressive stance on rate cuts could bolster the U.S. dollar, further straining the INR.
However, routine foreign exchange interventions by the Reserve Bank of India (RBI) through USD sales may help mitigate these losses. Looking ahead, the U.S. is set to release data on Building Permits and Housing Starts later in the day, while Fed officials Raphael Bostic, Neel Kashkari, and Christopher Waller are scheduled to speak.
In October, foreign investors have withdrawn $8.4 billion from Indian equities, marking the highest monthly outflow since at least 2002. “The market opening appears stable, with close attention on the RBI’s interventions, which have been selling around 84.09,” commented Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
Recent U.S. economic data revealed a 0.4% month-on-month increase in retail sales for September, surpassing the 0.3% forecast, while retail sales excluding automobiles rose by 0.5%, up from a revised 0.2% in August. Initial Jobless Claims for the week ending October 11 increased to 241,000, lower than market expectations and down from the previous week’s 260,000 (revised from 258,000).
According to the CME FedWatch tool, traders are pricing in a nearly 90.3% likelihood of a 25 basis point Fed rate cut in November.
From a technical perspective, the USD/INR maintains a bullish outlook. The pair is well-supported above the ascending trend line and the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) is positioned above the midline near 60.60, suggesting the uptrend is likely to strengthen.
Immediate resistance for the USD/INR is near the all-time high of 84.15, with the next barrier at 84.50, potentially leading to the psychological level of 85.00. Conversely, a decisive drop below the rising trend line could see the pair test 83.90, the low from October 10, with further support at 83.71 (the 100-day EMA) and 83.00, marking the low of May 24.
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