Key Points:
- The USD/INR pair remains above the 100-day EMA, with key resistance at 83.55, 83.72, and 84.00 and support at 83.00 and 82.78.
- A modest recovery of the USD, driven by demand from local importers, contributed to the INR’s decline.
On Friday, the Indian Rupee (INR) weakened against the US Dollar (USD). Several factors contribute to this decline, including a modest recovery of the USD, renewed demand for the USD from local importers, and outflows from Indian equities. Despite easing political uncertainties following India’s recent election, the INR faced downward pressure.
USD Recovery and Import Demand Weaken INR
The modest recovery of the USD played a significant role in the INR’s decline. Renewed demand from local importers who required USD to settle transactions bolstered this recovery. Additionally, outflows from Indian equities added to the pressure on the INR. Despite the political stability achieved post-election, these economic factors dominated the currency’s movement.
Political Stability and RBI Intervention on INR
The recent elections in India have eased political uncertainties, creating a more stable environment. However, more than this, political stability is needed to counteract the economic pressures on the INR. The potential intervention from the Reserve Bank of India (RBI) could support the INR. Such intervention might cap the downside risks for the currency, offering some stability in the face of ongoing challenges.
Interest Rate, Payroll Data Crucial for USD/INR
Two significant events could impact the INR. First, the RBI is expected to maintain the status quo in its interest rate decision scheduled for Friday, with no change anticipated since the last rate adjustment in February 2023. Second, they will release US employment data, including Nonfarm Payrolls, the Unemployment Rate, and Average Hourly Earnings for May. Softer-than-expected US data might lead to speculation of a Federal Reserve rate cut, which could influence the USD/INR exchange rate.
USD/INR Above 100-Day EMA Shows Positive Outlook
From a technical perspective, the USD/INR pair shows a positive outlook above the 100-day Exponential Moving Average (EMA). Despite trading softer on the day, the pair maintains a constructive outlook on the daily timeframe, holding above the descending trend channel’s upper boundary and the 100-day EMA. The Relative Strength Index (RSI) hovering near the 50-midline suggests a neutral tone, although consolidation cannot be ruled out.
USD/INR Resistance at 83.55, 83.72, 84.00
In a bullish scenario, the USD/INR faces immediate resistance at the June 5 high of 83.55, followed by additional resistance at the April 17 high of 83.72 and the round mark of 84.00. Conversely, in a bearish scenario, the first downside filter appears in the 83.30-83.35 zone, reflecting the resistance-turned-support level and the 100-day EMA. Key support levels include the psychological mark of 83.00 and further downside to the January 15 low of 82.78.
