USD/INR higher ahead of US PMI data

• The Indian rupee weakens in the first Asian session on Thursday, pressured by a sell-off in Indian stocks.
• RBI intervention and low crude oil prices could limit INR downside.
• Investors await the US ISM services PMI due later on Thursday.

The Indian Rupee (INR) extended its decline on Thursday despite a weaker US Dollar (USD). A sell-off in domestic stocks tracking global indices has weighed on the INR, dragging the local currency close to all-time lows. However, possible intervention by the Reserve Bank of India (RBI) through USD selling could prevent the Indian rupee from breaking the 84 mark. Additionally, a fall in crude oil prices could help limit the INR’s losses as India is the third nation from the oil-consuming and importing world.

The US ISM Services Purchasing Managers’ Index (PMI) is due later on Thursday, which is expected to have fallen to 51.1 in August from 51.4 in July. On Friday, attention will turn to US Non-Farm Payrolls (NFP) for August. This event could provide some clues about the size and pace of interest rate cuts by the Federal Reserve (Fed) this year.

Daily Digest Market Movers: Indian rupee looks vulnerable ahead of US NFP data

• The HSBC India Services Purchasing Managers Index (PMI) improved to 60.9 in August from 60.3 in July, above the market consensus of 60.4. This figure was the highest since March.
• “The Indian rupee was again stopped near 83.9750, the lowest possible close by the RBI, as it sold dollars to ensure that it remains within a short distance of the psychological level of 84.00. The risk-off sentiment ensured that markets continued to buy dollars and the RBI continued to supply them,” said Anil Kumar Bhansali, head of treasury and managing director at Finrex Treasury Advisors LLP.
• The jobs and labor turnover survey showed that available positions fell to 7.67 million in July, compared with 7.91 million jobs (revised from 8.1 million) recorded in June, the Labor Department reported Wednesday. This figure was below the market consensus of 8.1 million.
• Atlanta Fed President Raphael Bostic said Wednesday that he is ready to start cutting interest rates even though inflation is still above the U.S. central bank’s target.
• Markets are now pricing in a nearly 57 percent chance of a 25 basis point (bps) rate cut by the Fed in September, while the odds of a 50 basis point cut are 43 percent, according to CME’s FedWatch tool.

Technical Analysis: USD/INR outlook remains positive

The Indian rupee softens during the day. According to the daily chart, the USD/INR pair remains stuck in an ascending triangle. However, the constructive view of the pair prevails as the price is holding above the 100-day exponential moving average (EMA) with the 14-day relative strength index (RSI) pointing higher above the median line near 59.55.

A major resistance level appears in the 84.00-84.05 region, featuring the psychological figure of 84.00, the upper boundary of the triangle and the September 4 high. Sustained trading above this level could lift USD/INR to 84.50.

On the downside, the ascending triangle support near 83.90 acts as an initial support level for the pair. A breach of the said level could revise the 100-day EMA at 83.63.