USD/INR maintains positive ground as risk-off sentiment dominates

• The Indian rupee falls in the Asian session on Thursday.
• Risk-off sentiment and higher crude oil prices drag INR lower.
• Investors await September’s US ISM services PMI ahead of employment data on Thursday.

The Indian Rupee (INR) is softening today, pressured by renewed demand for the US Dollar (USD). The willingness to take risks amid escalating geopolitical tensions in the Middle East boosts refugee flows, to the benefit of the Green Bill. Additionally, rising crude oil prices are putting some selling pressure on the INR as India is the third largest oil consumer after the United States (US) and China.

Looking ahead, investors will keep an eye on September’s US ISM Services Purchasing Managers’ Index (PMI), initial weekly jobless claims and final S&P Global Services PMI due later Thursday. Attention will turn to US employment data for September on Friday, including non-farm payrolls (NFP), the unemployment rate and average hourly earnings. If the jobs report were to show a weaker-than-expected result, it could prompt the central bank to consider a deeper rate cut, which could put some selling pressure on the USD.

Daily Digest Market Movers: Indian rupee remains weak amid several headwinds

• HSBC’s final India manufacturing PMI fell to an eight-month low of 56.5 in September. This figure was below the market consensus of 56.7 and the previous reading of 57.5.
• “Momentum in India’s manufacturing sector eased in September due to very strong growth in the summer months,” said Pranjul Bhandari, chief India economist at HSBC.
• According to the Reserve Bank of India’s (RBI) Real Effective Exchange Rate (REER) index, the Indian rupee stood at 5.5% above its fair value in August, down from 7.7% the previous month.
• US ADP labor change data for September beat expectations with 143,000 new jobs added. This figure was above the average forecast of 120,000 and the previous reading of 103,000 (revised from 99,000).
• Richmond Fed President Thomas Barkin said on Wednesday that the Fed’s fight to return inflation to its 2 percent target may take longer than expected to complete and limit how much interest rates can be cut, according to Reuters.

Technical Analysis: USD/INR maintains its constructive bias

The Indian rupee softens during the day. As per the daily time frame, the positive view on the USD/INR pair prevails as the price is holding above the 100-day exponential moving average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) is crossing the median line near 60.30, suggesting that the uptrend is more likely to resume than reverse.

The crucial resistance level for the pair appears at the psychological mark of 84.00. Sustained sustained momentum above this level could pave the way to 84.15, the August 5 high. The next upside barrier is seen at 84.50.

On the other hand, the initial support level for USD/INR is seen at 83.80, the October 1 low. A break lower could pull the pair further south to the 100-day EMA at 83.64 followed by 83.00 representing the round mark. and the low of May 24.