USD/INR is down ahead of Fed Chair Powell’s speech

• The Indian rupee strengthens in the Asian session on Friday.
• Accommodative Fed comments, lower crude oil prices and RBI intervention continue to support the INR.
• Investors will be closely monitoring Fed Chairman Jerome Powell’s speech on Friday.

The Indian Rupee (INR) is trading with slight gains on Friday as accommodative minutes from the US Federal Reserve (Fed) and low crude oil prices support the local currency. Traders also expect the INR downside to be limited as the Reserve Bank of India (RBI) may step in to sell the USD and prevent the INR from breaking the key 84.00 level.

However, relentless demand for greenbacks from importers and ongoing foreign fund inflows could dampen investor sentiment and drag the Indian rupee lower. Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium will take center stage on Friday, which could provide insight into the future trajectory of US interest rates.

Daily Digest Market Movers: Indian rupee bounces back, but upside potential looks limited

• The Reserve Bank of India (RBI) on Thursday released the minutes of the Monetary Policy Committee (MPC) meeting, stressing that policy must continue to be actively disinflationary to ensure inflation is anchored at the target level.
• India’s central bank noted that headline inflation moved upward in June to 5.1 percent as food inflation pressures picked up and offset the impact of core inflation and subdued deflation in the fuel group.
• HSBC India’s preliminary Manufacturing Purchasing Managers’ Index (PMI) fell to 57.9 in August from 58.1 in July. The services PMI rose to 60.4 in August from the previous reading of 60.3.
• The US S&P Global Composite PMI fell slightly to 54.1 in the August flash estimate from 54.3 in July, better than expectations of 53.5. Meanwhile, the manufacturing PMI fell to 48 over the same period from 49.6. The services PMI rose to 55.2 in August from 55 previously.
• Federal Reserve Bank of Boston President Susan Collins said it would soon be appropriate to start cutting interest rates, adding that incoming data would guide the pace of rate cuts.
• Kansas City Fed President Jeff Schmid noted on Thursday that he is watching the dynamics behind the rise in the unemployment rate more closely and will let the data guide his decision on whether to support a rate cut next month.
• Investors are now pricing in about 76% odds of a 25 basis point (bps) Fed rate cut at the September meeting, according to CME’s FedWatch tool.

Technical Analysis: USD/INR’s constructive outlook remains in place

The Indian Rupee is trading firmer today. The most notable feature of the USD/INR pair is the strong uptrend as the price remains above the key 100-day exponential moving average (EMA) and the 11-week uptrend line. Additionally, the 14-day Relative Strength Index (RSI) is pointing higher above the median line near 58.40, suggesting bullish momentum is sustained.

If USD/INR shows upward pressure above the psychological 84.00 mark, the pair could retest the record high of 84.24. A decisive break above this level may attract buyers at 84.50.

Sustained trading below the uptrend line around 83.92 could attract sellers and drag the pair to 83.77, the August 20 low. The next level of contention to watch is the 100-day EMA at 83.57.