USD/INR is moving sideways on potential RBI intervention, low oil prices

• The Indian rupee remains steady amid rising speculation over RBI interventions in the open forex markets.
• Low crude oil prices favor the INR as India is the world’s third largest oil consumer and importer.
• The US dollar depreciates as Treasury yields continue to fall ahead of CPI data.

The USD/INR pair remains range-bound around the 84.00 level on Wednesday. Traders are speculating potential interventions by the Reserve Bank of India (RBI) in the open forex market to support the Indian Rupee (INR) and prevent it from weakening beyond the 84.00 level.

The Indian rupee gained support against the US dollar (USD) on lower crude oil prices. This could ease downward pressure on the INR as India, the world’s third largest oil consumer and importer, will benefit from lower import costs. Concerns about weakening global demand sent Brent crude futures down to their lowest level since December 2021 of $64.75 a barrel.

The US dollar (USD) faces challenges as US Treasury yields continue to fall ahead of US consumer price index (CPI) data scheduled to be released later in North American time. This inflation report may provide new clues about the potential extent of interest rate cuts by the Federal Reserve (Fed) in September.

Daily Digest Market Movers: Indian rupee strengthens on rising speculation on RBI interventions

• According to the CME FedWatch tool, markets fully anticipate a rate cut of at least 25 basis points (bps) by the Federal Reserve at its September meeting. The probability of a 50 bps rate cut fell slightly to 31.0%, down from 38.0% a week ago.
• The first US presidential debate between former President Donald Trump and Democratic nominee Kamala Harris of Pennsylvania opened with a critical focus on the economy, inflation and economic policies. Trump remarked, “We have a terrible economy. We have inflation that is probably the worst in history. This was a disaster for the people.”
• On Tuesday, Reuters reported that six Indian bankers indicated that investors are urging the Indian federal government to increase issuance of short-term and green bonds and restart floating-rate bond auctions. These recommendations were discussed during a series of meetings on the government’s borrowing strategy for the second half of the fiscal year.
• Chicago Fed President Austan Goolsbee noted on Friday that Fed officials are beginning to align with broader market sentiment that a policy rate adjustment by the U.S. central bank is imminent, according to CNBC. FXStreet’s FedTracker, which uses a custom AI model to rate Fed officials’ speeches on a scale of 0 to 10, rated Goolsbee’s comments as upbeat, assigning them a score of 3.2.
• India’s foreign reserves hit a record $683.99 billion on August 30, up from $681.69 billion previously. This growth is largely due to a substantial inflow of foreign exchange into the Indian economy, boosted by robust economic growth and the long-awaited inclusion of Indian assets in JPMorgan’s major emerging market debt index, which boosted foreign investment.
• “India’s composite PMI continued to post strong growth in August, driven by accelerated business activity in the services sector, which expanded at its fastest rate since March. This growth was largely fueled by an increase in new orders, particularly domestic orders,” said Prânjul Bhandari, Chief India Economist at HSBC.

Technical Analysis: USD/INR is hovering below 84.00, the upper limit of the symmetrical triangle

The Indian rupee is trading around 84.00 on Wednesday. An analysis of the daily chart shows that the USD/INR pair is consolidating in a symmetrical triangle pattern, which suggests low volatility and a period of consolidation. However, the 14-day Relative Strength Index (RSI) remains above 50, signaling a bullish trend.

On the downside, the nine-day EMA at 83.92 could act as immediate support, coinciding with the lower boundary of the symmetrical triangle near 83.90. A break below this level could signal a bearish shift, potentially putting downward pressure on the USD/INR pair and pushing it towards a six-week low of 83.72.

On the resistance side, the USD/INR pair is testing the upper boundary of the symmetrical triangle near the 84.00 level. A break above this point could take the pair to the all-time high of 84.14, recorded on August 5.

USD/INR: Daily Chart