USD/INR weakens as flows likely to boost Indian rupee

• The Indian rupee gains ground in the Asian session on Friday.
• Weaker USD and portfolio flows support the INR, while higher crude oil prices could limit its upside.
• Investors await Harker’s Fed speech on Friday.

The Indian Rupee (INR) extends its lead against the weaker US Dollar (USD) on Friday. The INR is trading near two-month highs, supported by likely portfolio flows and an appreciation in the Chinese yuan after the US Federal Reserve (Fed) kicked off its easing cycle with an unexpected 50 basis point rate cut basis at its meeting in September. In addition, sales in USD likely from major foreign banks on behalf of custodial clients help boost the local currency.

However, further rise in crude oil prices could limit the upside for the INR as India is the third largest oil consumer after the United States (US) and China. Philadelphia Fed President Patrick Harker is scheduled to speak later on Friday.

Daily Digest Market Movers: Indian rupee trades firmer on favorable economic factors

• According to the Reserve Bank of India (RBI), foreign reserves will increase by USD 66 billion in 2024 to a total of USD 689.235 billion.
• “The recent rally in the rupee reflects favorable domestic conditions and the impact of global monetary policy changes. As Fed decisions continue to weigh on markets, all eyes will be on the Reserve Bank of India’s response and whether the rupee can maintain its upward trajectory. For now, 84 will serve as a strong resistance level while 83.50 will act as a robust support,” said Amit Pabari, Managing Director at CR Forex.
• Initial jobless claims were US weekly at 219,000 for the week ended September 14, the US Department of Labor (DoL) showed on Thursday. This figure was below the market consensus of 230K and lower than the previous week’s 231K (revised from 230K).
• US existing home sales fell 2.5% in August to 3.86 million from 3.96 million in July.
• The Philadelphia Fed Manufacturing index unexpectedly rose to 1.7 in September, compared to a decline of 7 in the previous reading, better than the estimate of -1.

Technical Analysis: USD/INR is resuming its broader bearish trend

The Indian Rupee is trading stronger today. USD/INR’s downtrend resumes as the pair broke below the rectangle and 100-day exponential moving average (EMA) on the daily chart. Bearish momentum is supported by the 14-day Relative Strength Index (RSI), which is below the midline near 32.40, supporting sellers for now.

The initial support level for the pair appears at 83.50, the July 17 low. Bearish momentum could pave the way to 83.31, the June 18 low. The next level of depreciation is seen at the psychological mark of 83.00.

On the upside, the 100-day EMA at 83.64 will be the immediate resistance level for USD/INR, followed by 83.75, the lower boundary of the rectangle. The main barrier to watch is the 83.90-84.00 zone.