The Indian Rupee (INR) edged lower on Wednesday, retreating from a two-week high reached in the previous session, as month-end US Dollar (USD) demand from local corporations and foreign banks—likely on behalf of custodial clients—put pressure on the currency. Additionally, rising expectations of an interest rate cut by the Reserve Bank of India (RBI) weighed on the Rupee.
Despite the decline, lower global crude oil prices could provide some support for the INR. As the world’s third-largest oil importer, India typically benefits from falling energy prices, which help ease the country’s trade deficit and inflation pressures.
Market participants are closely watching several upcoming US data releases, including the Conference Board’s Consumer Confidence index, Durable Goods Orders, and the Dallas Fed Manufacturing Index, due later Tuesday. However, the release of the Federal Open Market Committee (FOMC) meeting minutes on Wednesday is expected to be the key event, offering insights into the US Federal Reserve’s policy outlook.
“It’s a very EM [emerging markets] positive environment, and I don’t see any reason why that will stop in the near term,” said Brad Bechtel, Global Head of Foreign Exchange at Jefferies. He added that the USD could face intensified selling pressure if China allows the Yuan to appreciate significantly.
Speculation surrounding monetary policy in India is also growing. A poll by Moneycontrol suggests that the RBI’s Monetary Policy Committee (MPC) is likely to cut the repo rate by 25 basis points at its June meeting. This dovish shift could further limit the Rupee’s upside.
Meanwhile, in a significant economic milestone, NITI Aayog CEO BVR Subrahmanyam announced that India has overtaken Japan to become the world’s fourth-largest economy, citing data from the International Monetary Fund (IMF).
On the US front, the CME FedWatch Tool shows that the probability of a rate cut by the Federal Reserve at its June meeting remains low at just 5.6%, suggesting continued policy divergence with India.
Technical Outlook – USD/INR:
Despite the Rupee’s intraday weakness, the broader outlook for USD/INR remains bearish. The pair continues to trade below its 100-day Exponential Moving Average (EMA), indicating a negative bias. This view is further supported by the 14-day Relative Strength Index (RSI), which stands near 45.00, suggesting momentum remains tilted to the downside.
The first key support for the pair lies at 84.78—the low from May 26. A break below this level could trigger further declines toward 84.61 (May 12 low), with the next downside target at 84.05, marking the lower boundary of the prevailing trend channel.
On the upside, immediate resistance is seen at the 100-day EMA at 85.55. A sustained move above this level could open the door for a rally toward 85.75, the upper trend channel limit. A further push higher would bring the May 22 high at 86.10 into focus.
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