The Indian Rupee (INR) continued its decline on Wednesday, weighed down by robust demand for the US Dollar (USD) and persistent global economic uncertainties. A cautious stance by the Federal Reserve (Fed) has further supported USD strength, contributing to the pressure on the local currency.
Despite this, inflows from the rebalancing of MSCI’s global equity indexes, which have drawn over $1 billion in net purchases into Indian equities, may help mitigate the Rupee’s depreciation. Additionally, potential intervention by the Reserve Bank of India (RBI) in the foreign exchange market could limit losses.
Global and Domestic Factors Impacting INR
The INR faces headwinds as investors seek the relative safety of the USD amid heightened geopolitical risks and trade uncertainties. US President-elect Donald Trump’s announcement of proposed tariffs—25% on goods from Mexico and Canada, and an additional 10% on Chinese imports—has added to market unease.
On the domestic front, HSBC Global Research has noted an overall upward trajectory in parts of the Indian economy, even as the Rupee remains under pressure.
Minutes from the Federal Open Market Committee (FOMC) revealed a cautious approach to rate cuts, as easing inflation and a strong labor market provide limited urgency for aggressive monetary easing. According to the CME FedWatch Tool, the probability of a 25-basis-point Fed rate cut in December has decreased to 57.7%, down from 69.5% a month ago.
Technical Outlook: USD/INR Maintains Bullish Momentum
The USD/INR pair continues its upward trajectory, trading within an ascending trend channel on the daily chart. The pair holds above the 100-day Exponential Moving Average (EMA) at 83.94, supported by a 14-day Relative Strength Index (RSI) positioned above the midline at 55.30, indicating sustained bullish momentum.
Key resistance for the pair lies in the 84.50-84.55 range, which marks an all-time high and the upper boundary of the trend channel. A breakout above this level could pave the way for a rally toward the 85.00 psychological threshold.
On the downside, initial support is seen at 84.24, the trend channel’s lower limit, followed by the 100-day EMA at 83.94. The August 1 low of 83.65 serves as an additional support zone.
Key Data Awaited
Market participants are closely monitoring the release of critical US economic indicators, including the Core Personal Consumption Expenditures (Core PCE) Price Index for October, Initial Jobless Claims, Chicago PMI, Durable Goods Orders, and Pending Home Sales. These data points will likely shape near-term USD/INR dynamics.
Outlook
While MSCI index-driven foreign inflows and RBI intervention may offer temporary reprieve, the Indian Rupee remains vulnerable to external pressures. The trajectory of the USD/INR pair will hinge on upcoming US data and the Fed’s policy cues, with the broader trend favoring USD strength in the near term.
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