USD/INR struggles to gain ground on weaker US dollar as investors await Fedspeak

• The Indian rupee is holding steady near two-week highs in the first Asian session on Tuesday.
• Falling greenback and low crude oil prices support INR; renewed USD demand and outflows from India could limit its growth.
• Investors will be watching Tuesday’s Fed speeches by Raphael Bostic and Michael Barr.

The Indian Rupee (INR) is trading flat on Tuesday. Further decline in the US dollar (USD) boosted Asian currencies and lifted the INR to its highest level in two weeks. Further, lower crude oil prices are likely to support the local currency as India is one of the largest importers of crude oil.

On the other hand, renewed demand for USD from public sector banks and exits from local equities could limit INR gains. Investors will focus on Tuesday’s speeches by Feds Raphael Bostic and Michael Barr. The highlight will be Fed Chairman Jerome Powell’s speech on Friday, which could provide some insight into the way forward for US interest rates. On the Indian front, the first reading of HSBC’s Purchasing Managers’ Index (PMI) for August will be released on Wednesday.

Daily Digest Market Movers: Indian rupee regains some ground lost to USD

• “A large public sector bank started buying (dollars) when the currency touched 83.85/$1 and there is a good possibility that the PSU bank will buy on behalf of the central bank as the RBI may not be comfortable with the rise in rupees. ” said Anil Bhansali, Head of Treasury at Finrex Treasury Advisors LLP.
• International Monetary Fund (IMF) Deputy Managing Director Dr Gita Gopinath said she hopes India will become the third largest economy by 2027 as growth performed much better than expected in the last fiscal year and that they are carried over. the effects affect our forecast for this year.
• The RBI noted that demand conditions in the Indian economy are gaining momentum, adding that easing inflationary pressures have pushed rural spending and led to a catch-up in urban consumption volumes, according to RBI’s August 2024 monthly bulletin.
• India’s exports fell 6 percent in the current fiscal year to July compared to the same period a year earlier. In FY24, foreign direct investment in India fell by 3.5%. Foreign portfolio investors (FPIs) have been pulling cash out of India due to the country’s overheated stock market.
• Minneapolis Federal Reserve Bank President Neel Kashkari said Monday he would be open to cutting U.S. interest rates in September because of the growing possibility that the labor market will loosen too much.

Technical Analysis: USD/INR resumes downward journey

The Indian rupee trades on a flat note on the day. USD/INR’s bullish outlook looks vulnerable as the pair is testing the 11-week uptrend line on the daily time frame. A daily close below the upside support could lead to a decline towards the 100-day exponential moving average (EMA). However, the 14-day Relative Strength Index (RSI) is above the median line near 54.0, indicating that the upward momentum remains in place.

If the pair closes decisively below the uptrend line at 83.90, it will signal the downtrend of USD/INR. The next downside points to watch are the 100-day EMA at 83.56, followed by 83.36, the June 28 low.

Furthermore, the psychological barrier of 84.00 acts as a key resistance level for the pair. Extended gains above this level could pave the way to an all-time high of 84.24 followed by 84.50.