The Indian Rupee (INR) saw a dip on Wednesday, weighed down by rising geopolitical tensions between India and Pakistan. Reports of military activity in Kashmir have sparked uncertainty, leading to the closure of several tourist sites in the region since Tuesday. Traders are reacting to unverified claims of a possible escalation, contributing to the rupee’s weakness.
Despite these concerns, the rupee’s losses were somewhat mitigated by positive domestic market conditions and a drop in crude oil prices. Over the past week, foreign investors have increased their purchases of Indian stocks, reversing earlier trends of selling pressure.
In the coming days, traders are closely watching the US ADP Employment Change report, scheduled for release later on Wednesday, as well as the Personal Consumption Expenditures (PCE) Price Index and the preliminary estimate of Q1 Gross Domestic Product (GDP). On Friday, attention will shift to the highly anticipated US Nonfarm Payrolls (NFP) report for April.
Geopolitical tensions between India and Pakistan have escalated, with Pakistan’s information minister stating that Islamabad has “credible intelligence” of an impending Indian military strike, according to Al Jazeera. This follows a warning from Pakistan’s defense minister regarding the possibility of an Indian military incursion after last week’s deadly militant attack on tourists in Kashmir, as reported by Reuters.
In a separate development, US Treasury Secretary Scott Bessent mentioned on Monday that several of the US’s major trading partners, including India, had presented solid proposals to avoid US tariffs, with a deal potentially being signed soon.
Economic data from the US showed that job openings dropped to 7.19 million in March, the lowest since September 2024, below the market consensus of 7.5 million. Additionally, the US Conference Board’s Consumer Confidence Index fell to 86.0 in April, marking the lowest level since April 2020. These figures contributed to a rising likelihood of a rate cut by the US Federal Reserve, with the probability of a cut increasing to 56.8%.
In terms of technical analysis, the USD/INR pair remains in a negative bias, trading below the 100-day Exponential Moving Average (EMA) on the daily chart. Bearish momentum is supported by the 14-day Relative Strength Index (RSI), which is positioned below the midline near 39.70. A breakdown below the trend channel’s lower limit at 84.70 could lead to further declines toward 84.22, the low from November 25, 2024. Extended losses could target 84.08, the low from November 6, 2024.
On the upside, the pair faces key resistance at 85.78, the 100-day EMA. A sustained move above this level could signal a potential reversal, paving the way for further gains toward 86.35, the upper boundary of the trend channel.
Related Topics:
