USD/INR is trading with slight gains, supported by US dollar demand

• Indian rupee weakens in first Asian session on Tuesday.
• Month-end USD demand and higher crude oil prices weigh on INR.
• Traders await August US CB consumer confidence ahead of key events later this week.

The Indian Rupee (INR) is trading on a weaker note on Tuesday. Demand for US dollars (USD) from local banks and corporates at the end of the month and a rise in crude oil prices are likely to limit the local currency’s gains. On the other hand, the pair’s advantage could be limited due to the upbeat remarks of US Federal Reserve (Fed) Chairman Jerome Powell at the Jackson Hole Symposium, which raised the possibility of a deeper interest rate cut at the September meeting.

Investors will be keeping an eye on US Consumer Confidence for August on Tuesday. US second quarter (Q2) annualized gross domestic product (GDP) and personal consumption expenditure (PCE) price index data will be closely watched this week. On the Indian ledger, quarterly GDP for Q1 will be released on Friday.

Daily Digest Market Movers: Indian rupee remains vulnerable amid global factors and challenges

• “We expect the rupee to trade with a slight risk-on bias in global risk sentiment amid dovish Fed talk and rising expectations of a rate cut by the Fed in September. However, geopolitical tensions in the Middle East and rising crude prices could limit the surge,” said Anuj Choudhary, research analyst at Sharekhan at BNP Paribas.
• India’s economic growth likely expanded at the slowest pace in a year in the April-June quarter due to lower government spending, according to a Reuters poll.
• San Francisco Fed President Mary Daly said on Monday that “the time has come” to cut interest rates, possibly starting with a quarter-percentage point cut in borrowing costs, according to Reuters.
• Richmond Fed President Thomas Barkin said Monday he would take a “test and learn” approach to cutting interest rates.
• US durable goods orders rose $26.1 billion, or 9.9%, to $289.6 billion in July, from a -6.9% decline in June. The figure was above market consensus for a 4% rise and marked the most significant gain since May 2020.
• Currently, futures prices are on a nearly 40% chance of a half percentage point cut in interest rates.

Technical Analysis: USD/INR remains bullish in the long term

The Indian rupee is trading softer during the day. The USD/INR pair is maintaining a positive outlook above the 100-day exponential moving average (EMA) on the daily chart. However, the price has broken below the three-month-old uptrend line, while the 14-day Relative Strength Index (RSI) is hovering around the midline, suggesting that further consolidation cannot be ruled out.

The support-turned-resistance level at the psychological 84.00 mark acts as an immediate upside barrier for USD/INR. Further north, the next target appears at the record high of 84.24 on the way to 84.50.

On the downside, initial support is at 83.77, the lowest since August 20. A break below said level will see a decline to the 100-day EMA at 83.57.