The Indian Rupee (INR) continued its upward momentum on Wednesday, bolstered by strong interventions from the Reserve Bank of India (RBI). In addition, selling by exporters and profit-taking by speculators helped sustain support for the local currency. However, the INR’s upside potential could be capped by ongoing concerns about India’s sluggish economic growth, its widening trade deficit, rising crude oil prices, and the looming risk of new U.S. trade tariffs.
As the day progresses, market participants will closely monitor key economic data, including India’s Consumer Price Index (CPI) for January, Industrial Output, and Manufacturing Output. In the U.S., CPI inflation data will also be scrutinized, alongside speeches from Federal Reserve officials Raphael Bostic and Christopher Waller, which could provide insights into the Fed’s future monetary policy direction.
Indian Rupee Performance Amid Global Trade Tensions
Despite global challenges, the Indian Rupee has depreciated by 3.60% since September 2024, a smaller drop compared to other major currencies like the Japanese Yen (-6.49%), the Canadian Dollar (-5.71%), the British Pound (-7.58%), the Australian Dollar (-9.04%), and the Euro (-7.53%), according to Bloomberg data. The currency has also faced outflows, with foreign investors pulling over $7.5 billion from Indian stocks and bonds this year.
Federal Reserve Chairman Jerome Powell, in his semi-annual report to Congress, emphasized that the central bank does not need to rush rate cuts due to the ongoing strength in the U.S. labor market and overall economic growth. He also warned that tariff policies from former President Donald Trump could exacerbate inflationary pressures, complicating the Fed’s efforts to lower interest rates.
Technical Outlook for USD/INR: Short-Term Downward Pressure Expected
From a technical perspective, the Indian Rupee showed resilience as the USD/INR pair remained bullish above the 100-day Exponential Moving Average (EMA), indicating strong support. The 14-day Relative Strength Index (RSI) remains above the neutral 50 level, reinforcing the potential for further gains.
The first key resistance for USD/INR is at the psychological 87.00 level, with a sustained move above this threshold possibly targeting a new high near 88.00. The next key resistance is seen at 88.50. On the downside, initial support is at 86.51, the low from February 3, and a break below this level could expose further downside to 86.14, the low from January 27.
As the global economic landscape remains unpredictable, traders and investors will continue to monitor these technical levels and economic indicators to gauge the future direction of the Indian Rupee.
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