The Indian Rupee (INR) weakened on Thursday, facing selling pressure as geopolitical tensions in Kashmir and rising crude oil prices dampened market sentiment. India, being the world’s third-largest oil consumer, is particularly sensitive to fluctuations in global oil prices, which exacerbate the pressure on its currency.
The INR’s losses were somewhat tempered by a softer US Dollar, which could limit further declines. Investors are also awaiting key economic data later in the day, including US weekly Initial Jobless Claims, the Chicago Fed National Activity Index, Durable Goods Orders, and Existing Home Sales, which could influence global market trends.
The Indian Rupee’s decline coincided with escalating tensions in Jammu and Kashmir, where a terrorist attack on Tuesday killed at least 28 people and injured several others. The attack, near the resort town of Pahalgam, was the deadliest since 2019. In response, India has vowed retaliation, while countries including the US and China condemned the attack.
The economic outlook for India showed mixed signals. The HSBC India Manufacturing PMI rose to 58.4 in April, up from 58.1 in March, while the Services PMI increased to 59.1, from 58.5 in March. The Composite PMI, which combines both manufacturing and services, climbed to 60.0 in April, from 59.5 the previous month. These improvements were attributed to a surge in new export orders, driven in part by a 90-day pause in tariff implementations.
However, despite the positive domestic data, global factors are weighing heavily on the INR. Crude oil prices are rising, contributing to inflationary pressures, and the continuing geopolitical instability in Kashmir has compounded risk sentiment.
In the forex market, the USD/INR pair remains in a bearish trend, with the exchange rate trading below the critical 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) also signals continued downward momentum, with the INR’s outlook remaining negative in the near term.
Technical levels for USD/INR show initial support at 84.85, the lower boundary of the descending trend channel, with further potential downside targets at 84.22 and 84.08. On the upside, resistance levels are seen at 85.85 and 86.45, where the 100-day EMA and trend channel upper boundary lie, respectively.
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