USD/INR strengthens as US dollar demand weighs on Indian rupee

• The Indian rupee is trading in negative territory in the Asian session on Monday.
• Month-end USD flows and potential RBI intervention support the pair.
• Investors will monitor Bowman’s speech on Monday.

The Indian Rupee (INR) weakened on Monday, pressured by month-end US dollar (USD) demand from importers and likely interventions by the Reserve Bank of India (RBI). However, strong inflows and low oil prices could help limit INR losses.

Investors will focus on Fed Governor Michelle Bowman’s speech on Monday, which could provide insight and an outlook on US interest rates. The Chicago Purchasing Managers’ Index (PMI) and the Dallas Fed’s Manufacturing Business Index will also be released. On the Indian file, the August federal fiscal deficit is due later in the day

Daily Digest Market Movers: Indian rupee eases as USD demand weighs heavily

• The Indian Rupee has remained largely flat against the USD in the current calendar year (CY 2024), depreciating by just 0.59% so far.
• Chief Economic Adviser (CEA) V Anantha Nageswaran said on Friday that the Indian economy is expected to grow at a rate of 6.5-7% in the current financial year on a constant basis.
• The Price Index for Personal Consumption Expenditures (PCE) rose 2.2% year-on-year in August, compared with 2.5% in July, the US Bureau of Economic Analysis (BEA) showed on Friday. This figure was weaker than estimates of 2.3%.
• Core PCE, which excludes more volatile food and energy prices, rose 2.7% from a year ago in August, compared with the previous reading of 2.6%, in line with the consensus of 2.7%. On a monthly basis, the core PCE price index rose 0.1% in the same reporting period, up from 0.2% previously.
• The University of Michigan’s consumer sentiment index rose to 70.1 in September from 66.0 in August, better than estimates of 69.3.
• Interest rate futures had a nearly 54 percent chance of a half-point cut in November, compared with a 46 percent chance of a quarter-point cut, according to CME’s FedWatch tool.

Technical Analysis: USD/INR tests rectangle pullback, success could see upside resumption

The Indian rupee is trading softer during the day. According to the daily chart, the constructive trend of the USD/INR pair persists as the price is holding above the 100-day exponential moving average (EMA). However, further downside looks favorable as the RSI is below the midline near 46.60.

The support-turned-resistance level at 83.75 acts as an immediate resistance level for USD/INR. Further north, the next upward barrier appears at 84.00.

The potential support level is located at the 100-period EMA at 83.62. Any continued selling below this level will see a drop to 83.00, representing the psychological level and May 24 low.