The Indian Rupee (INR) remained flat near its all-time low on Thursday, despite a higher-than-expected inflation reading. India’s Wholesale Price Index (WPI)-based inflation rose to 2.36% year-on-year (YoY) in October, up from 1.84% in September and exceeding the market consensus of 2.20%. However, the INR showed little movement in response to this inflationary pressure.
The Indian currency continues to face downward pressure due to persistent foreign fund outflows, sluggish domestic stock market performance, and the strong rally in the US Dollar Index (DXY). Foreign investors pulled nearly $3 billion from Indian stocks in November, following a staggering $11 billion in outflows in October. Indian equity indices have fallen by more than 9% since their late September peak, further undermining investor sentiment toward the INR.
Despite these challenges, the Indian Rupee’s losses are being tempered by falling crude oil prices and regular interventions by the Reserve Bank of India (RBI), which are expected to help limit volatility in the near term. Market participants will also be watching key US economic data later today, including the October Producer Price Index (PPI), weekly Initial Jobless Claims, and comments from Federal Reserve officials, which could influence the INR’s performance.
US Economic Data Supports Strong Dollar
In the US, the Consumer Price Index (CPI) rose by 2.6% YoY in October, in line with expectations, while core CPI, which excludes food and energy, climbed 3.3% YoY, meeting forecasts. Despite this, US Federal Reserve officials have expressed caution regarding further rate cuts. Kansas Fed President Jeffrey Schmid noted that the Fed’s previous interest rate cuts reflect growing confidence that inflation is under control, but offered no indication of how many more cuts may be needed. Meanwhile, St. Louis Fed President Alberto Musalem and Dallas Fed President Lorie Logan have both emphasized the challenges posed by persistent inflation, signaling that further rate cuts may come slowly.
The strength of the US Dollar, bolstered by high Treasury yields and hawkish Fed rhetoric, continues to weigh on emerging market currencies like the INR. This has kept the USD/INR pair in a bullish trend, with further upside potential, although overbought conditions could prompt short-term consolidation.
Technical Outlook for USD/INR
From a technical perspective, the USD/INR pair remains firmly above the key 100-day Exponential Moving Average (EMA), suggesting that the uptrend is likely to resume. However, the 14-day Relative Strength Index (RSI) is currently above 70, indicating overbought conditions, which may lead to some consolidation before any further gains.
The immediate resistance for USD/INR is at 84.50, with sustained trading above this level potentially pushing the pair toward the 85.00 psychological barrier. On the downside, the resistance-turned-support level at 84.32 is a key level to watch. A break below this could bring the pair to the 84.05-84.10 range, marking the lower boundary of the trend channel. The next support level to watch is 83.86, the 100-day EMA. A decisive breach of this level could signal a shift toward a downtrend.
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