USD/INR weakens on improving risk appetite

• The Indian rupee gathers strength in the Asian session on Wednesday.
• Improved risk appetite and weakening USD support INR.
• Investors await August US home sales and Kugler’s Fed speech on Wednesday.

The Indian Rupee (INR) is rising on Wednesday. Improved risk appetite following China’s stimulus measures and a softer US dollar (USD) boost the local currency on the day. However, rising crude oil prices, outflows linked to a resurgence in the FTSE equity indices and renewed USD demand from major Indian importers could put some selling pressure on the INR.

Data on US new home sales for August is available on Wednesday. Traders will take more cues from US Federal Reserve (Fed) Governor Adriana Kugler’s speech. Any dovish remarks from Fed officials are likely to weigh on the greenback against the Indian rupee. The highlight for this week will be the August US Personal Consumer Expenditure (PCE) price index data, which will be released on Friday.

Daily Digest Market Movers: Indian rupee remains firmer amid global risk-on mood

• S&P Global Ratings on Tuesday kept India’s Gross Domestic Product (GDP) growth forecast at 6.8 percent, while noting that the Reserve Bank of India (RBI) may cut interest rates in October.
• “We expect the rupee to trade on a positive trend amid improving global risk appetite on China’s stimulus and dollar softness. However, high crude oil and other commodity prices could sharply limit upside,” noted Anuj Choudhary, research analyst at BNP’s Sharekhan. Paribas.
• The Conference Board’s US consumer confidence index fell to 98.7 in September from a revised 105.6 in August. This figure marked the biggest drop since August 2021.
• Fed Governor Michelle Bowman said on Tuesday that key measures of inflation remain “uncomfortably above” the 2 percent target, warranting caution as the Fed continues to cut interest rates. However, she preferred the Fed to cut by a quarter of a percentage point, more in line with traditional central bank moves.
• Markets are pricing in a nearly 56% chance of a second 50bps rate cut at the November meeting, while the chance of 25bps is 44%, according to CME’s FedWatch tool.

Technical Analysis: USD/INR downtrend remains unchanged in the long term

The Indian rupee is trading on a stronger note on the day. The downside outlook for USD/INR prevails as the price remains capped below the key 100-day exponential moving average (EMA) on the daily chart. Bearish momentum is supported by the 14-day Relative Strength Index (RSI), which is below the midline near 36.00.

The first downside target for the pair appears at 83.44, the September 23 low. A breach of this level will see a decline to the crucial support level at 83.00, which represents the psychological level and the May 24 low.

Sustained trading above the 100-day EMA at 83.62 could pave the way for the support-turned-resistance level at 83.75. The key barrier for USD/INR is located at the round mark of 84.00.