The Indian Rupee (INR) slipped against the US Dollar (USD) on Tuesday, but it may find support from expected foreign fund inflows as the Indian stock market follows the upward trajectory of its Asian counterparts, buoyed by a record close on Wall Street.
The USD/INR pair may face downward pressure due to declining oil prices, as India is the world’s third-largest oil importer, and oil constitutes a substantial portion of the country’s import expenses. Recent reports indicate that Israel plans to avoid targeting Iranian oil facilities, easing fears of potential supply disruptions and contributing to the decline in crude oil prices.
On Monday, the INR experienced downward pressure as foreign institutional investors sold a net total of ₹37.32 billion (approximately $444 million) in stocks, marking their eleventh consecutive session of net selling. In contrast, domestic investors net purchased shares valued at ₹22.78 billion, according to Reuters.
Market Highlights:
The USD/INR pair is hovering around 84.00, near its highest level, as the USD continues to strengthen amid diminishing expectations for further aggressive interest rate cuts by the US Federal Reserve (Fed). The CME FedWatch Tool currently indicates an 83.6% probability of a 25-basis-point rate cut in November, with no larger reductions anticipated.
A report from the Washington Post on Monday noted that Israeli Prime Minister Benjamin Netanyahu informed the United States of Israel’s intent to focus on Iranian military targets rather than nuclear or oil infrastructure.
Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, reassured markets on Monday by reiterating the Fed’s data-dependent approach, highlighting the strength of the US economy, ongoing easing of inflationary pressures, and a robust labor market, despite a recent uptick in the overall unemployment rate.
The INR is facing challenges from safe-haven flows as tensions in the Middle East escalate, raising concerns of a broader regional conflict. Reports indicate that at least four Israeli soldiers were killed, and over 60 others injured in a drone attack in north-central Israel on Sunday.
India’s Consumer Price Index (CPI) rose to 5.49% year-over-year in September, significantly up from 3.65% in August and surpassing market expectations of 5.0%. This marks the highest inflation rate recorded this year, exceeding the Reserve Bank of India’s target of 4%, after briefly dipping below this threshold in the first two months of the September quarter.
Technical Analysis: The USD/INR pair is trading around 84.00 on Tuesday. Daily chart analysis indicates that the pair is positioned within an ascending channel pattern, suggesting a bullish bias. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 mark, indicating ongoing bullish sentiment.
On the resistance front, the USD/INR pair may encounter a barrier around its all-time high of 84.14, recorded on August 5. A breakout above this level could push the pair toward the upper boundary of the ascending channel at around 84.30.
Conversely, immediate support appears at the lower boundary of the ascending channel near the psychological level of 84.00, followed by the nine-day Exponential Moving Average (EMA) at 83.97.
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