The Indian Rupee (INR) held steady on Friday, supported by the Reserve Bank of India’s (RBI) likely intervention to curb excessive depreciation. The RBI is believed to have sold US Dollars (USD) through state-run banks to stabilize the currency, keeping losses in check. However, continued demand for USD from importers, especially oil companies, as well as foreign banks, poses ongoing pressure on the INR. Moreover, geopolitical uncertainties and the potential for US trade tariffs under President-elect Donald Trump could further weaken the Indian currency in the short term.
As traders await key US economic data, including December’s housing figures such as Building Permits and Housing Starts, as well as Industrial Production, the market remains cautious.
Indian Rupee Under Pressure from Importer Demand
“Most foreign banks were buying dollars, while the RBI sold dollars to cap depreciation near the 86.50/$1 level, although some further depreciation was seen, pushing the pair to 86.55/$1,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
India’s trade deficit narrowed to $21.94 billion in December from $37.84 billion in November, driven by a sharp reduction in gold and oil import bills, according to data from the Ministry of Commerce and Industry.
US Economic Data: Retail Sales and Jobless Claims Weigh on Market Sentiment
The US Census Bureau reported a weaker-than-expected 0.4% month-on-month rise in December Retail Sales, below the anticipated 0.6%. Additionally, US Initial Jobless Claims rose to 217K for the week ending January 10, surpassing market expectations of 210K. Meanwhile, comments from Federal Reserve officials highlighted differing perspectives on the future course of US monetary policy. Fed Governor Christopher Waller indicated that interest rate cuts could be possible if inflation continues to ease, while Fed Chicago President Austan Goolsbee expressed growing confidence in the stabilization of the labor market.
Technical Outlook for USD/INR
The USD/INR pair maintains a positive bias, with higher highs and higher lows forming on the daily chart. The pair is trading above the 100-day Exponential Moving Average (EMA), suggesting an upward trajectory. However, the 14-day Relative Strength Index (RSI) has entered overbought territory, surpassing the 70.00 level, indicating potential consolidation or temporary weakness in the short term.
If bullish momentum continues, immediate resistance is seen at the all-time high of 86.69, with further upside targeting the psychological 87.00 level. On the downside, if bearish momentum prevails, the pair could see support around 86.30, the low of January 15, with further targets at 85.85 and 85.65, the lows of January 10 and 7, respectively.
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