On Tuesday, the Indian Rupee (INR) continued its upward trajectory, buoyed by positive sentiment in global markets, inflows from Foreign Institutional Investors (FIIs), and robust performance in domestic markets. However, the potential delay in interest rate cuts by the Federal Reserve (Fed), driven by encouraging US labor market data and economic strength, may limit the downside of the USD/INR pair.
Investors are closely eyeing the US March Consumer Price Index (CPI) report scheduled for Wednesday, seeking insights into the inflation trend in the US. Analysts anticipate a slight easing to 0.3% MoM in March from the previous reading of 0.4%. A stronger-than-expected CPI figure could dampen expectations for Fed rate cuts in June, while weaker data could fuel speculation for rate reductions.
Meanwhile, the Indian market will be closed on Thursday for Ramadan Eid, with attention turning to the release of India’s CPI report for March and Industrial Production for February on Friday.
Key Market Insights:
India’s CPI inflation is expected to have moderated to a five-month low of 4.91% in March, although it remains above the Reserve Bank of India’s (RBI) 4% medium-term target, primarily due to persistent food price rises.
RBI Governor Shaktikanta Das highlighted concerns over food price volatility, underscoring its impact on millions of vulnerable households reliant on government food subsidies.
The RBI affirmed its capability to manage significant inflows, signaling readiness to purchase Dollars to prevent excessive appreciation.
Notably, the RBI continued its accumulation of gold reserves, with weekly data revealing a substantial 6-tonne increase in holdings in February alone.
Minneapolis Fed President Neel Kashkari hinted at the possibility of interest rate cuts this year, contingent on inflation trends.
According to CME’s FedWatch tool, investors have scaled back expectations of rate cuts in June to below 50%, down from about 57% a week earlier.
Technical Analysis:
In the longer term, the bullish trend persists for USD/INR, as the pair breached a descending trend channel established over nearly four months since March 22.
In the short term, USD/INR remains above the crucial 100-day Exponential Moving Average (EMA) on the daily timeframe, with the 14-day Relative Strength Index (RSI) indicating bullish sentiment around 55.0, suggesting further upside potential.
Support levels lie at 83.20 (high of March 21), followed by the 83.00–83.50 region (100-day EMA) and 82.80 (low of March 14). On the upside, a decisive move above 83.45 (high of April 5) could propel the pair towards its all-time high of 83.70, with the psychological level of 84.00 in sight.
