USD/INR loses momentum despite US dollar strength

• The Indian rupee holds positive ground in the Asian session on Monday.
• Firmer USD, external outflows and higher crude oil prices could undermine the INR.
• Traders await Fedspeak later Monday.

The Indian Rupee (INR) is recovering some ground lost on Monday. A stronger US dollar (USD), increased outflows of funds from local equities and rising crude oil prices could weigh on the local currency.

Traders will be keeping an eye on Fedspeak later Monday for further impetus. Any dovish comments from US Federal Reserve (Fed) officials could push the greenback lower and support the INR. On Wednesday, the Reserve Bank of India’s (RBI) interest rate decision will be in focus. India’s central bank is unlikely to cut its benchmark interest rate in its upcoming bi-monthly monetary policy review later in the week as retail inflation remains high.

Daily Digest Market Movers: Indian rupee rebounds, upside potential appears limited

• HSBC India’s services purchasing managers’ index (PMI) fell to a 10-month low of 57.7 in September from 60.9 in August, below the market consensus of 58.9.
• “The headline index of business activity fell below 60 for the first time in 2024, but we note that at 57.7 it was still well above the long-term average,” noted Prânjul Bhandari, HSBC’s chief economist for India.
• US nonfarm payrolls (NFP) rose by 254,000 in September from a revised 159,000 in August and above the market consensus of 140,000, the Bureau of Labor Statistics showed on Friday.
• The unemployment rate fell to 4.1% in September, down from 4.2% in August. Average hourly earnings rose to 3.8% from 3.6% over the same period.
• Chicago Fed President Austan Goolsbee said Friday he thought the recent employment data was “superb” and noted that additional reports like this one would boost his confidence that the U.S. economy has reached full employment with low inflation.

Technical Analysis: USD/INR maintains a long-term positive position

The Indian rupee is trading on a stronger note on the day. USD/INR’s constructive outlook prevails as the price is holding above the 100-day exponential moving average (EMA). The upside momentum is supported by the 14-day Relative Strength Index (RSI), which is above the median line near 59.80.

Steady trading above the key resistance level of 84.00, representing the upper boundary of the rectangle and the psychological sign, could help attract enough buyers to push USD/INR back to the all-time high of 84.15 on the way to 84.50 .

On the other hand, any further selling below 83.80, the October 1 low, could drag the pair to the 100-day EMA at 83.65. The next downside target appears at 83.00, representing the round mark and low of May 24.