The Indian Rupee (INR) traded flat on Wednesday, following its sharp decline to an all-time low in the previous session. Persistent weakness in the local currency is attributed to India’s sluggish GDP growth, sustained foreign outflows, and strong demand for the US Dollar (USD). However, the downside risk for the INR may be somewhat cushioned by the Reserve Bank of India’s (RBI) foreign exchange intervention, which has involved selling USD to support the currency.
Investors are awaiting the release of the HSBC India Services Purchasing Managers’ Index (PMI), which is expected to improve slightly to 59.2 in November from 58.5 in October. A stronger-than-expected PMI reading could provide a temporary boost to the Indian Rupee. On the US economic calendar, the ADP Employment Change report, final S&P Global Services PMI, ISM Services PMI, and the Federal Reserve’s Beige Book are set for release. Additionally, remarks from Federal Reserve Chair Jerome Powell later in the day will be closely monitored for insights into US monetary policy.
Geopolitical and Economic Factors Weigh on INR Outlook
Despite the RBI’s intervention efforts, the Indian Rupee remains vulnerable to broader economic and geopolitical pressures. According to Vishnu Kant Upadhyay, AVP – Research and Advisory at Master Capital Services Ltd., “While the RBI may intervene in the dollar market to temporarily strengthen the rupee, broader economic factors will likely continue to put pressure on the currency.”
On the US front, the latest data from the Bureau of Labor Statistics (BLS) revealed that the number of job openings rose to 7.744 million in November, up from 7.372 million in October, surpassing market expectations. This robust labor market data, combined with hawkish comments from Federal Reserve officials, is likely to support the US Dollar.
San Francisco Fed President Mary Daly emphasized that the central bank’s policies would remain focused on managing inflation while supporting a strong labor market. Similarly, Chicago Fed President Austan Goolsbee indicated that he expects a gradual reduction in interest rates over the next year, depending on economic conditions. Fed Governor Adriana Kugler also reaffirmed the US economy’s strong position, highlighting significant progress toward the Fed’s dual mandate of maximum employment and stable prices.
USD/INR Technical Outlook: Bullish Momentum Persists
The technical outlook for the USD/INR pair remains positive, with the currency pair continuing to trade above the key 100-day Exponential Moving Average (EMA), which provides support for further upside momentum. The 14-day Relative Strength Index (RSI) is currently above the neutral 50 mark, at 67, signaling that buyers are in control and the path of least resistance is to the upside.
On the upside, the immediate resistance is at the all-time high of 84.77. A decisive breakout above this level could pave the way for a move toward the psychological 85.00 mark, followed by a potential test of 85.50.
On the downside, a break below the support level at 84.55, which had previously acted as resistance, could push the pair lower toward 84.22, the low of November 25. The key support level remains at 84.00, which coincides with the 100-day EMA and represents a round psychological level for traders.
Related Topics:
