The Indian Rupee (INR) saw notable strength on Monday, bolstered by sustained inflows from Foreign Portfolio Investors (FPIs), who have continued buying Indian equities for the seventh consecutive day. This trend is expected to support the INR in the near term, along with a decline in crude oil prices, which benefits India as the third-largest oil consumer globally.
However, rising tensions with Pakistan pose a risk to the Rupee’s upward momentum. A ceasefire violation along the Line of Control (LoC) occurred shortly after the deadly terror attack in Pahalgam, Jammu and Kashmir, which claimed the lives of 26 individuals, mostly tourists. Such escalations could induce a risk-off sentiment among traders, potentially weighing on the INR.
Eyes are also on upcoming US economic data. Later on Monday, the US Dallas Fed Manufacturing Business Index for April will be released, followed by the preliminary reading of the US GDP for Q1 on Wednesday. The US Nonfarm Payrolls (NFP) report, due on Friday, will further shape market expectations.
India-Pakistan Tensions Add Uncertainty Amid Strong Rupee Performance
Tensions between India and Pakistan are escalating after a ceasefire violation by Pakistan’s military along the LoC, which came in the wake of the recent terror attack in Pahalgam. The situation remains volatile, with the Indian Army responding “effectively” to the ceasefire breach.
At the same time, India’s central bank, the Reserve Bank of India (RBI), is expected to cut the Repo Rate to 5.50% by the end of Q3, down from 5.75% in March, according to a Reuters poll. This move could provide further support for the INR.
In the US, Agriculture Secretary Brooke Rollins confirmed ongoing tariff discussions with China, with trade deals with other nations reportedly nearing completion. US President Donald Trump also indicated that the US would adopt a reasonable approach to tariffs, with markets adjusting to the new policy.
Technical Outlook for USD/INR: Bearish Bias Under 100-Day EMA
The technical outlook for the USD/INR remains negative, with the currency pair trading below the critical 100-day Exponential Moving Average (EMA) on the daily chart. The Relative Strength Index (RSI) is also below the midline, reinforcing the bearish sentiment in the near term.
Support for the pair is initially seen at 84.80, the lower limit of a descending trend channel, with further downside potential toward 84.22 and 84.08. On the upside, the first resistance is at 85.80, with a potential break above this level targeting 86.35, the upper boundary of the trend channel.
As India navigates both domestic challenges and external factors, the INR’s performance will depend on foreign investment trends, geopolitical developments, and the global economic landscape.
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