USD/INR strengthens as month-end US dollar demand drags Indian rupee lower

• The Indian rupee attracts some sellers in the first Asian session on Wednesday.
• Weakening Asian benchmarks and month-end USD demand weigh on INR.
• Investors await the Fed’s Waller and Bostic speeches on Wednesday for fresh impetus.

The Indian rupee (INR) extended losses on Wednesday, pressured by weakness in Asian benchmarks and demand for US dollars (USD) from importers. However, positive domestic markets and accommodative comments by Federal Reserve (Fed) Chairman Jerome Powell at the Jackson Hole meeting last week could cushion the local currency’s downside.

Later on Wednesday, the Fed’s Christopher Waller and Raphael Bostic are scheduled to speak. Annualized advanced US Gross Domestic Product (GDP) for the second quarter (Q2) will be released on Thursday, which is expected to increase by 2.8%. On Friday, the US Personal Consumption Expenditure (PCE) price index and the Indian GDP quarter for the first quarter (Q1) of the fiscal year 2024-25 (FY25) will be in focus.

Daily Digest Market Movers: Indian rupee looks fragile despite Fed’s wisdom

• The International Monetary Fund (IMF) has estimated that India’s real GDP growth will reach 7% in 2024 to remain the fastest growing major economy in the world.
• India’s economic growth in the April-June quarter was expected to expand at the slowest pace in a year due to lower government spending, according to a Reuters poll.
• The Conference Board’s US consumer confidence index rose to 103.3 in August from an upwardly revised 101.9 in July, marking a six-month high.
• The U.S. home price index fell 0.1% month-on-month in June, better than the estimate of a 0.2% increase, the Federal Housing Finance Agency showed on Tuesday.
• Futures currently have a nearly 34.5% chance of a half-percentage-point cut in interest rates, according to CME’s FedWatch tool.

Technical Analysis: USD/INR’s positive outlook remains in play

Indian rupee weakens on that day. Technically, the constructive picture of the pair remains intact as the price is above the 100-day exponential moving average (EMA) on the daily time frame. The 14-day Relative Strength Index (RSI) remains above the median line near 58.00, suggesting that the support level is likely to hold rather than break.

The first upside barrier to watch for USD/INR is the support-turned-resistance level at the psychological level of 84.00. Any further buying above this level could pave the way for the next hurdle near the record high of 84.24 en route to 84.50.

In the bearish event, the August 20 low at 83.77 acts as an initial support level for the pair. Extended losses could expose the 100-day EMA at 83.60.