Wednesday witnessed a robust performance by the Indian Rupee (INR), although potential gains remain cautious as traders adopt a wait-and-watch approach ahead of the Federal Reserve’s Open Market Committee (FOMC) interest rate decision.
India’s remarkable growth trajectory has garnered attention, with Chief Economic Adviser V Anantha Nageswaran expressing optimism that India could achieve a $7 trillion economy by 2030. However, concerns loom over persistent inflation risks and escalating oil prices amid geopolitical tensions in the Middle East, posing potential challenges to the Indian economy.
The Federal Reserve is widely expected to maintain benchmark interest rates at a 23-year high of 5.25–5.5% during its January meeting. The likelihood of a rate cut in March has diminished, given the economy’s surprising resilience. The CME FedWatch Tool indicates an 85% probability of a rate cut in the May meeting.
Wednesday’s focal point will be the FOMC’s announcement of its rate decision at 19:00 GMT, followed by a press conference by Chairman Jerome Powell at 19:30 GMT. Powell’s insights could shed light on the central bank‘s outlook and provide clues about potential rate cuts in 2024. Additionally, Thursday will witness the release of India’s S&P Global Manufacturing PMI for January, with all eyes on the Indian Interim Budget 2024 for the fiscal year 2024–25.
Indian Rupee Resilient Amid Global Challenges
The International Monetary Fund (IMF) has revised India’s GDP growth forecast for 2024-25 to 6.5%, up from the earlier projection of 6.3%. In contrast, India’s foreign exchange reserves dipped by $2.79 billion to $616.14 billion for the week ending January 19, as reported by the Reserve Bank of India (RBI).
As anticipation builds for the federal budget presentation for 2024–25 on Thursday, expectations arise that the government will aim to reduce the fiscal deficit by at least 50 basis points (bps). Remarkably, the Indian Rupee emerged as the best-performing currency in Asian markets in January 2024, experiencing a 1% to 2% increase.
The National Statistical Office (NSO) forecasts a growth rate of 7.3% for India in FY24, surpassing the 7.2% recorded in FY23. In international economic indicators, the US witnessed a rise in job openings to 9.026 million in December, while the Conference Board Consumer Confidence surged to a two-year high in January, reaching 114.8 compared to the prior 108.0.
Technical Analysis: Indian Rupee Treads Within Range; Potential for Upside Movement
In terms of technical analysis, the Indian Rupee exhibited strength on the day, maintaining a range-bound theme between 82.78 and 83.45 against the US Dollar (USD). The USD/INR pair remains within a two-month descending trend channel of 82.78–83.45 and finds support above the key 100-period Exponential Moving Average (EMA) on the daily chart.
However, the bullish outlook faces vulnerability as the 14-day Relative Strength Index (RSI) hovers around the 50.0 midline, indicating a non-directional movement. The first resistance level stands at the upper boundary of the descending trend channel at 83.25. A sustained break above this level could open the path to bullish targets, reaching a high of January 2 at 83.35 and further aiming for the 2023 high of 83.47.
Conversely, a bearish breakout below the confluence of the 100-period EMA and a psychological level at the 83.00–83.05 region could signal a bearish momentum, targeting a low of December 18 at 82.90, followed by the lower limit of the descending trend channel at 82.72.