The Indian Rupee (INR) edged lower on Wednesday, pressured by foreign capital outflows and growing speculation around future interest rate cuts by the Reserve Bank of India (RBI). The USD/INR pair traded with a slight bullish bias but remained capped below key technical resistance, reflecting neutral momentum in the short term.
Zomato Outflows and RBI Expectations Pressure INR
The INR came under pressure following reports of $900 million in outflows tied to MSCI index rebalancing, notably from Zomato stock. According to Anil Kumar Bhansali of Finrex Treasury Advisors, this wave of outflows placed the INR in a vulnerable range of 84.75–85.50, especially near month-end when corporate and banking USD demand typically rises.
At the same time, expectations of a dovish tilt from the Reserve Bank of India, possibly delivering rate cuts in the coming quarters, have weighed on the Rupee. The RBI has acknowledged softening inflation pressures, and traders are beginning to price in a pivot in monetary policy as growth headwinds persist.
USD Gains Offset by Fiscal Concerns and Lower Oil Prices Favoring INR
Despite stronger-than-expected US macro data, including a rise in Consumer Confidence (98.0 in May from a revised 85.7 in April) and relatively firm Durable Goods Orders (-6.3% vs. -7.9% expected), the US Dollar remains weighed by growing fiscal and trade policy concerns. Fed officials, including Minneapolis Fed President Neel Kashkari, have warned that escalating tariffs could be stagflationary, complicating future policy actions.
The recent dip in crude oil prices has provided some cushion for the INR, given India’s reliance on energy imports. Lower oil prices ease import bills and reduce inflationary pressures, improving the country’s external balance.
Upcoming Data: India Industrial Output and US FOMC Minutes
Market participants are awaiting India’s April Industrial and Manufacturing Output data for cues on domestic economic health. Later in the day, the FOMC meeting minutes will be closely watched for insights into the Fed’s future rate path, especially amid fiscal headwinds and geopolitical tensions.
Technical Outlook: USD/INR Holds Bearish Bias Below 100-Day EMA
From a technical standpoint, the USD/INR pair continues to reflect a bearish tone, with prices trading below the 100-day Exponential Moving Average (EMA), currently acting as resistance near 85.55. The 14-day Relative Strength Index (RSI) hovers around 50, indicating a lack of clear directional bias in the immediate term.
Support Levels:
- 84.78 – Low of May 26
- 84.61 – Low of May 12
- 84.00 – Psychological support and channel floor
Resistance Levels:
- 85.10 – May 22 swing high
- 85.55 – 100-day EMA (key pivot point)
- 85.75 – Upper boundary of the prevailing trend channel
A decisive break below 84.78 could signal further downside toward 84.00, while a close above 85.55 would challenge the bearish structure and potentially attract bullish momentum toward 85.75.
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