USD/INR remains under pressure ahead of US PMI data

• The Indian rupee is higher in the Asian session on Monday.
• Strong overseas inflows from India boost the INR, but higher crude oil prices and a stronger USD could cap its gains.
• Investors will monitor US PMI data for September on Monday.

The Indian Rupee (INR) extended the course on Monday, supported by positive momentum in Indian equity markets amid a massive inflow of foreign funds. However, a further rise in crude oil prices and renewed demand for US dollars (USD) from importers could limit the upside for the local currency.

Moving forward, the quick reading of US Purchasing Managers’ Index (PMI) data for September is due on Monday. Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee and Atlanta Fed President Raphael Bostic are scheduled to speak later in the day. Any sign of weaker US economic data or dovish remarks from Fed officials could undermine the greenback.

Daily Digest Market Movers: Indian rupee gains strength amid strong foreign portfolio investor (FPI) flows

• The HSBC India Manufacturing PMI fell to 56.7 in September from the previous reading of 57.5.
• India’s foreign exchange reserves rose by $223 million to a new all-time high of $689,458, according to Reserve Bank of India (RBI) data released on Friday.
• India is projected to become the world’s third largest economy by 2030-31, according to S&P Global India. The country is expected to grow at an annual rate of 6.7%.
• Philadelphia Fed President Patrick Harker noted Friday that the U.S. central bank has effectively navigated a challenging economy over the past few years. Harker added that there is a risk that the decline in inflation will stall and the labor market will weaken.
• Fed Governor Michelle Bowman said cutting interest rates by half a percentage point this week risks signaling that the Fed is declaring victory over inflation too early, according to Bloomberg.
• Fed Governor Christopher Waller said on Friday that the decision to cut interest rates by a 50 bps acceleration was the right choice, but we can see plenty of room to move lower over the next 6 to 12 months, adding that the Fed it might even break. , depending on the data.

Technical Analysis: USD/INR looks oversold in the shorter term

The Indian rupee is strengthening on this day. USD/INR’s bearish outlook remains in play as the price is holding below the 100-day exponential moving average (EMA) on the daily chart. Further consolidation of the pair cannot be ruled out before positioning for any short-term USD/INR depreciation as the 14-day Relative Strength Index (RSI) is near 26.40, indicating an oversold condition.

The 100-day EMA at 83.62 acts as the first upside barrier for USD/INR. The psychological level of 84.00 seems to be a tough nut to crack for the USD/INR bulls.

On the other hand, the June 19 low at 83.30 acts as an initial support level for the pair. Extended losses could lead to a decline to the 83.00 round mark.