USD/INR Trend: Resistance at 84.00, WPI at 2.50%

USD/INR Trend: Resistance at 84.00, WPI at 2.50%

Key Points:

  • USD/INR is in an uptrend, with key support at 83.30-83.35 and resistance at 83.60-84.00.
  • Stronger US Dollar and anticipated Fed-rate cuts influence INR depreciation.
  • Projected WPI inflation at 2.50%, indicating rising inflationary pressures.

The Indian Rupee (INR) has been under significant pressure recently, influenced by various domestic and international factors. As of Friday, the currency’s performance reflects a complex interplay of market forces, ranging from movements in the US Dollar to domestic economic indicators and Reserve Bank of India (RBI) interventions.

USD’s Rise and Expected Fed Rate Cut of 25 bps

The primary factor influencing the Indian Rupee is the recent gains in the US Dollar. A stronger US Dollar typically leads to a depreciation of emerging currencies like the INR. The anticipation of a rate cut by the US Federal Reserve also plays a crucial role. The market expects one rate cut, likely by 25 basis points, which could alleviate some pressure on the INR. However, the timing and certainty of this rate cut remain pivotal in determining its actual impact.

USD/INR Weakness Due to Increased Crude Oil Costs

Crude oil prices have a substantial negative impact on the INR. As a major importer of crude oil, India faces increased financial outflows when oil prices rise, exerting downward pressure on the Rupee. The current scenario with rising crude prices further exacerbates the vulnerability of the INR, making it more challenging for the currency to maintain stability.

RBI Interventions to Prevent INR Depreciation

An essential factor in keeping the INR stable is the Reserve Bank of India. The RBI has actively engaged in the foreign exchange market to reduce excessive volatility. These interventions are vital to prevent a sharp depreciation of the INR, ensuring economic stability and maintaining investor confidence.

Rising WPI Inflation at 2.50% and INR Effects

The Wholesale Price Index (WPI) inflation data for May 2024 is projected at 2.50%, up from the previous reading of 1.26%. This increase indicates rising inflationary pressures within the economy. While moderate inflation can be positive for the INR, signalling economic growth, excessive inflation could erode purchasing power and investor confidence. Therefore, the impact of this data on the INR will depend on the broader economic context and RBI’s monetary policy response.

USD/INR Uptrend: Key Levels 83.30 to 84.00

From a technical perspective, the USD/INR is in an uptrend. Key indicators on the daily timeframe, such as the 100-day Exponential Moving Average and the 14-day Relative Strength Index (RSI), support this trend. The 100-day EMA is above, and the RSI is in the bullish zone at 55.50. Key upside barriers are 83.60, 83.72, and 84.00, while support levels are identified at 83.30-83.35, 83.00, and 82.78.