The Indian Rupee (INR) remained under pressure on Tuesday, following its decline to a fresh all-time low in the previous session. Disappointing domestic economic data, ongoing foreign fund outflows, and increased demand for the US Dollar (USD) continue to weigh on the local currency. US President-elect Donald Trump’s recent threat of a 100% tariff on BRICS nations if they undermine the USD adds further pressure on the INR.
Despite the rupee’s vulnerability, its downside could be limited by routine interventions from the Reserve Bank of India (RBI). Traders are closely monitoring upcoming US data, including the JOLTs Job Openings for October, as well as speeches from Federal Reserve officials. Additionally, key events later this week include the RBI’s interest rate decision and the release of the US Nonfarm Payrolls for November.
Challenges for INR: Weak Economic Data and Declining Reserves
India’s economic outlook is facing headwinds, as evidenced by the HSBC India Manufacturing Purchasing Managers Index (PMI), which dropped to 56.5 in November from 57.5 in October. Although this figure remains in expansionary territory, it fell short of market expectations. HSBC’s Chief India Economist, Pranjul Bhandari, noted that strong international demand, highlighted by a four-month high in new export orders, continued to drive growth in the manufacturing sector.
India’s foreign exchange reserves also saw a decline, dropping by USD 1.31 billion to USD 656.58 billion for the week ending November 22, according to RBI data.
Meanwhile, US economic indicators showed improvement. The ISM Manufacturing PMI for the US climbed to 48.4 in November from 46.5 in October, better than expectations, but still signaling contraction. US Federal Reserve officials are also making waves in the market, with Governor Christopher Waller expressing a preference for rate cuts at the December meeting, while Atlanta Fed President Raphael Bostic remained undecided, awaiting more data before finalizing his stance.
USD/INR Technical Outlook: Bulls Eye 85.00 Mark
The USD/INR pair continues to exhibit a strong bullish trend, maintaining a firm position above the 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) is near 75.15, indicating an overbought condition, which suggests a potential period of consolidation before further gains.
The 85.00 level remains a key resistance point for the bulls. A sustained break above this level could see the pair rise towards 85.50. On the downside, a rejection from the resistance-turned-support at 84.55 could pull the pair back to 84.22, followed by the next support level at 83.98, near the 100-day EMA.
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