On Wednesday, the Indian Rupee (INR) experienced a decline, nearing its lowest level in a month. This downtrend can be attributed to several factors, including the strengthening of the US Dollar (USD), rising crude oil prices, and the overall weakness observed in other Asian currencies. However, despite these challenges, the positive outlook for the Indian economy may provide support for the INR and potentially limit the upside of the currency pair.
The optimism surrounding the Indian economy stems from projections indicating an 8% growth rate for the current year. This optimistic forecast is based on the robust macroeconomic environment highlighted in the Reserve Bank of India’s (RBI) monthly bulletin released on Tuesday.
Attention in the financial markets is also directed towards the US Federal Reserve (Fed) interest rate decision scheduled for Wednesday. While no change in interest rates is anticipated, traders will closely monitor Chairman Jerome Powell’s press conference and the economic projections presented post-meeting. Additionally, on Thursday, the release of India’s S&P Global Manufacturing and Services PMI figures will be awaited by market participants.
In terms of recent market developments, data from the RBI’s March 2024 bulletin indicates that Foreign Direct Investment (FDI) in India amounted to $25.53 billion, with outflows totaling $10.11 billion for the period spanning April 2023 to January 2024. Notably, the net FDI witnessed a year-on-year decline of 38.4% to $15.41 billion during the first ten months of the current financial year.
Looking ahead, analysts widely anticipate that the Federal Open Market Committee (FOMC) will maintain its key federal funds interest rate within the range of 5.25% to 5.5% during its March meeting. It is expected that FOMC Chairman Powell will reaffirm the central bank‘s stance of requiring concrete evidence from inflation data before considering rate cuts in its efforts to combat inflationary pressures.
From a technical standpoint, the Indian Rupee is projected to persist within a longer-term trading band of 82.60–83.10. USD/INR is currently demonstrating a softer stance, with the currency pair continuing its range-bound movement within a descending trend channel that has been in place since December 8, 2023.
Technically, the bullish bias of USD/INR is reaffirmed as the pair surpasses the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Furthermore, the 14-day Relative Strength Index (RSI) remains in bullish territory above the 50.0 midline, providing support to buyers in the near term.
In the event of a sustained upward movement, the currency pair may encounter resistance levels at the 100-day EMA and the psychological level of 83.00, with further upside barriers positioned near the upper boundary of the descending trend channel at 83.10 and subsequently at 83.35, before potentially reaching the 84.00 mark.
Conversely, initial support for USD/INR is found at the March 14 low of 82.80, followed by the lower limit of the descending trend channel at 82.60. A breach of this level could extend the pair’s downtrend towards 82.45 and 82.25, respectively.
