The Indian Rupee (INR) continued to hover near historic lows on Thursday, despite intervention efforts by the Reserve Bank of India (RBI). Factors such as robust demand for the US Dollar (USD), concerns about India’s economic growth, and portfolio outflows following the strength of Donald Trump in the US presidential race have intensified selling pressure on the currency.
However, declining crude oil prices could offer some relief, given India’s position as the world’s third-largest oil consumer. Market participants are closely monitoring the US weekly Initial Jobless Claims and Goods Trade Balance reports, due later Thursday. Additionally, attention will turn to the RBI’s interest rate decision and the US Nonfarm Payrolls (NFP) report on Friday.
Mixed Economic Data Adds Pressure
Economic indicators have added complexity to the INR’s outlook. The HSBC India Services PMI fell to 58.4 in November from 59.2 in October, missing market expectations of 59.5. Pranjul Bhandari, Chief India Economist at HSBC, attributed this to robust hiring driven by increased business confidence, growing new orders, and strong international demand.
In the US, the Institute for Supply Management (ISM) reported a sharper-than-expected slowdown in services sector growth, with the PMI dropping to 52.1 in November from 56.0 in October. Similarly, the S&P Global Composite PMI declined to 54.9, falling short of expectations, while the Services PMI also softened to 56.1.
Fed Signals Optimism Amid Mixed Signals
Federal Reserve Chair Jerome Powell expressed optimism about the US economy during remarks on Wednesday, citing progress on inflation and historically low unemployment. He suggested that the Fed might adopt a more cautious stance in cutting interest rates further. Meanwhile, the Fed’s Beige Book survey showed a slight uptick in US economic activity in November, with businesses expressing improved sentiment about demand.
Technical Analysis of USD/INR
The USD/INR pair remains on an upward trajectory, holding above the key 100-day Exponential Moving Average (EMA). However, the presence of bearish divergence on the 14-day Relative Strength Index (RSI)—with price making higher highs while RSI forms lower highs—signals potential weakening of the uptrend.
Key resistance levels include the all-time high of 84.77, with further bullish momentum possibly pushing the pair toward the psychological mark of 85.00 and beyond to 85.50. Conversely, a break below the resistance-turned-support level at 84.60 could expose the pair to further declines, testing supports at 84.22 and 84.02, the latter corresponding to the 100-day EMA.
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