The Indian Rupee (INR) continues to rise against a softer U.S. Dollar (USD) on Friday, nearing two-month highs. This appreciation is supported by anticipated portfolio inflows and a stronger Chinese Yuan following the U.S. Federal Reserve’s unexpected 50 basis point rate cut at its September meeting. Additionally, significant USD sales by major foreign banks for their custodial clients are contributing to the Rupee’s upward movement.
However, rising crude oil prices may pose challenges for the INR, as India ranks as the third-largest oil consumer globally, following the U.S. and China. Fed Philadelphia President Patrick Harker is set to speak later today, which could further influence market dynamics. According to the Reserve Bank of India (RBI), foreign exchange reserves have increased by $66 billion in 2024, reaching a total of $689.235 billion.
“The recent rally of the Rupee reflects favorable domestic conditions alongside global monetary policy changes. With the Fed’s decisions impacting markets, all eyes will be on the Reserve Bank of India’s next moves and whether the Rupee can sustain its upward trend. Currently, the 84 level serves as a strong resistance point, while 83.50 acts as solid support,” stated Amit Pabari, Managing Director at CR Forex.
Recent U.S. economic data reveals that initial jobless claims fell to 219,000 for the week ending September 14, lower than the market consensus of 230,000 and down from the revised previous week’s total of 231,000. Additionally, existing home sales dropped by 2.5% month-over-month in August, totaling 3.86 million, compared to 3.96 million in July.
In contrast, the Philadelphia Fed Manufacturing Index unexpectedly rose to 1.7 in September, rebounding from a previous reading of -7 and outperforming estimates of -1.
The USD/INR pair is showing signs of a downtrend as it has broken below key support levels, including the rectangle pattern and the 100-day Exponential Moving Average (EMA) on the daily chart. The downward momentum is reinforced by the 14-day Relative Strength Index (RSI), which remains below the midline at approximately 32.40, favoring sellers for the moment.
Initial support for the USD/INR pair appears at 83.50, the low from July 17. Should bearish momentum persist, it could lead to a decline toward 83.31, the low recorded on June 18, with the psychological mark of 83.00 serving as the next support level.
On the upside, the 100-day EMA at 83.64 stands as the immediate resistance for USD/INR, followed by 83.75, the lower boundary of the recent rectangle formation. A crucial resistance zone to monitor lies between 83.90 and 84.00.
