The Indian Rupee (INR) saw gains against the US Dollar (USD) on Thursday, bolstered by a weaker USD and sustained foreign investments in Indian markets. Declining crude oil prices also contributed to the INR’s upward trajectory. However, potential rate cuts by the US Federal Reserve (Fed) tempered these gains, despite Fed Chair Jerome Powell acknowledging improvements in the labor market and progress in curbing inflation without committing to rate adjustments.
Nevertheless, increased demand for the Greenback from importers, influenced by high oil prices, poses a risk to the INR. India, being the third-largest global consumer of crude oil after the US and China, faces pressure from this dynamic. Investors are closely eyeing the US Consumer Price Index (CPI) inflation data for June, anticipating its impact on Fed policy decisions and the potential for a rate cut in September.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, predicts a slight bearish bias for the Indian Rupee amid domestic market weaknesses and a positive outlook for the US Dollar. Powell’s recent statements underscored the Fed’s data-driven approach to interest rate decisions, emphasizing economic indicators over political considerations. He emphasized that rate cuts would hinge on sustained progress towards the Fed’s inflation target of 2%.
Fed Governor Lisa Cook echoed these sentiments, suggesting that US inflation could continue to decline barring significant increases in the Unemployment Rate.
Technical analysis shows the USD/INR pair maintaining its upward trend above the 100-day Exponential Moving Average (EMA) on the daily chart, suggesting further consolidation. The pair has traded within a familiar range since March, supported by neutral momentum indicated by the 14-day Relative Strength Index (RSI) around the 50-midline.
A break above the upper boundary at 83.65 could propel the pair towards its all-time high of 83.75 and potentially to the psychological barrier of 84.00. Conversely, a decisive drop below the 100-day EMA at 83.36 might attract bearish pressure towards the 83.00 mark, with further support at 82.82, a low observed in January.
In conclusion, while the INR benefits from foreign investments and lower oil prices, challenges from US monetary policy and domestic economic factors pose uncertainties for its near-term trajectory against the USD.
Related Topics:
