The Indian Rupee (INR) slid to a new all-time low on Monday, pressured by consistent foreign outflows from Indian equities and expectations of a stronger U.S. Dollar (USD) following Donald Trump’s U.S. presidential election win. Higher U.S. bond yields further compounded the pressure on the INR, driving more investors toward the Greenback.
India’s heavy reliance on oil imports could mitigate some of the currency’s decline, as lower crude oil prices offer some relief. Additionally, the Reserve Bank of India (RBI) has engaged in periodic U.S. Dollar sales to stabilize the INR, which may help limit its depreciation in the short term. Traders are now focused on India’s October Consumer Price Index (CPI) data, set for release on Tuesday, while the U.S. CPI report is due on Wednesday.
Market Drivers: Foreign Equity Outflows Continue to Pressure INR
Foreign investors have withdrawn over $1.5 billion from Indian equities so far in November, following October’s significant $11 billion outflow. According to Societe Generale, the pace of these outflows is currently the primary driver of USD/INR’s trajectory, with expectations that this trend will not ease soon. India’s October CPI inflation rate is anticipated to rise to 5.80% year-over-year, up from September’s 5.49%.
In the U.S., consumer sentiment continues to improve, with the University of Michigan’s Consumer Sentiment Index rising to 73.0 in November, marking a seven-month high and beating market expectations of 71.0. Meanwhile, Minneapolis Fed President Neel Kashkari noted that while the U.S. economy remains resilient in combating inflation, the Federal Reserve has yet to achieve its long-term inflation target.
Technical Outlook: USD/INR Remains Bullish but Shows Overbought Signals
The USD/INR pair maintains a bullish outlook, trading above the crucial 100-day Exponential Moving Average (EMA) on the daily chart. However, with the 14-day Relative Strength Index (RSI) indicating an overbought condition at around 77.75, some consolidation may occur before further appreciation in USD/INR.
If buying momentum persists, USD/INR could advance to the next resistance level at 84.50, with 85.00 serving as a psychological barrier. On the downside, a breach below the trend channel’s lower boundary and the October 11 high (84.05-84.10) could prompt a pullback to 83.83, aligning with the 100-day EMA. Further declines may test the 83.46 level, the low recorded on September 24.
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