The Indian Rupee (INR) gained modest ground on Monday, supported by a slight dip in the US Dollar (USD). However, the currency remains under pressure due to renewed demand for the Greenback, a weakening Chinese Yuan, and persistent foreign fund outflows. These factors are expected to weigh on the INR in the near term, limiting its potential upside.
RBI Interventions and Forex Reserves
The Reserve Bank of India (RBI) has intervened in forex markets by selling USD to curb the Rupee’s losses. While these measures have provided short-term relief, they have also contributed to a decline in India’s forex reserves. With no major economic data releases from India or the US on Monday, market attention has shifted to risk sentiment and comments from Federal Reserve (Fed) officials, including Austan Goolsbee.
INR Outlook: Limited Upside
The Indian Rupee is projected to trade at approximately 84.5 per USD by December’s end, according to a Business Standard poll. Moody’s Ratings forecasts a 7.2% growth rate for the Indian economy in 2024, driven by recovering household spending and easing inflation. Growth is expected to moderate to 6.6% in 2025 and 6.5% in 2026.
However, external risks linger. MUFG Bank predicts continued challenges for Asian currencies through the first half of 2025, citing potential negative impacts from likely US tariff hikes.
US Economic Data and Fed Signals
US Retail Sales rose by 0.4% in October, surpassing market expectations of 0.3%. Meanwhile, Fed officials delivered mixed messages regarding the December rate decision. Chicago Fed President Austan Goolsbee advocated for a cautious approach to rate adjustments, while Boston Fed President Susan Collins indicated that a December rate cut remains uncertain. The CME FedWatch Tool shows markets pricing in a 60% likelihood of a 25-basis-point rate cut in December.
USD/INR Technical Analysis: Long-Term Bias Remains Positive
Despite the Indian Rupee’s daily gains, the USD/INR pair retains a long-term bullish trend, trading above the critical 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) exceeds 70, signaling overbought conditions and suggesting potential consolidation in the near term.
Resistance Levels: The immediate resistance at 84.50 remains pivotal. A sustained break above this level could propel the pair toward the 85.00 psychological mark.
Support Levels: The resistance-turned-support level at 84.35 provides initial support. A breach here could see the pair testing 84.00, with further downside potential toward 83.88, the 100-day EMA.
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