The Indian Rupee (INR) continued to trade in negative territory on Monday, as it faces sustained pressure following the announcement of new, larger-than-expected tariffs by US President Donald Trump. These tariffs, which are set to disrupt global trade and supply chains, have added to the strain on the INR. However, a dip in crude oil prices could help mitigate some of the losses for the Indian currency. As the world’s third-largest oil consumer, India typically benefits from lower crude prices, which can support the INR.
Investors are closely monitoring how these new tariffs will impact the foreign exchange market, especially ahead of the Reserve Bank of India’s (RBI) upcoming policy decision on Wednesday. The central bank is widely expected to cut interest rates by 25 basis points, responding to the global economic pressures caused by the tariffs and their potential impact on domestic growth.
Trump Tariffs and Strong US Economic Data Weigh on INR
The Indian Rupee remains under pressure, with ongoing concerns about the fallout from President Trump’s tariffs. Last week, Trump confirmed that a 26% tariff on imports from India will take effect from April 9, as part of a broader strategy to impose duties on all US imports. This move has added to uncertainty in the foreign exchange market, particularly as tariffs are expected to disrupt trade and supply chains globally.
In economic data, the HSBC final India Services Purchasing Managers’ Index (PMI) showed an improvement to 58.5 in March, up from a preliminary estimate of 57.5. Additionally, the Indian Composite PMI rose to 59.5, compared to an initial reading of 58.6. Despite these positive figures, the INR remains under pressure from global trade developments and the recent US tariff announcement.
On the US front, the March Nonfarm Payrolls (NFP) report showed a stronger-than-expected increase of 228,000 jobs, far surpassing the 135,000 forecast. The US Unemployment Rate ticked up slightly to 4.2%, while Average Hourly Earnings increased by 0.3% month-on-month, in line with market expectations. Federal Reserve Chairman Jerome Powell stated that inflation is likely to rise due to Trump’s tariffs, which could keep upward pressure on prices.
USD/INR Technical Outlook: Bearish Momentum Below Key Moving Average
The bearish outlook for the USD/INR pair remains intact in the longer term, as the exchange rate continues to trade below the critical 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) is also below the midline, sitting near 38.90, reinforcing the downward momentum and indicating that the path of least resistance for the pair is to the downside.
The immediate support for USD/INR is located at 85.20, the low from April 3. If the pair extends its losses, it could test the 85.00 psychological level. Further declines may see the pair approach the December 19 low of 84.84.
On the upside, the 100-day EMA at 85.87 remains a key resistance level. A break above this level could open the door for further gains, potentially targeting 86.48, the low from February 21, and then the round number resistance at 87.00.
In conclusion, while the INR is facing short-term pressures due to US tariffs, the central bank’s anticipated rate cut and the potential benefits from lower crude prices could provide some support. However, technical indicators suggest that the INR remains vulnerable to further downside in the coming sessions.
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