In the early European session on Monday, the Indian Rupee (INR) is under pressure, slipping close to its all-time low. A broadly robust US Dollar, buoyed by the Federal Reserve’s hawkish stance, is weighing on the INR. Additionally, the decline of the offshore Chinese Yuan and month-end importer demand for US Dollars have contributed to the rupee’s weakness.
The Reserve Bank of India (RBI) may intervene in the foreign exchange market by selling US Dollars, which could temporarily cap the INR’s losses. Looking ahead, market participants are waiting for the release of the US December Consumer Confidence and the Chicago Fed National Activity Index later on Monday, followed by Durable Goods Orders on Tuesday.
India’s foreign exchange reserves have been dwindling, hitting a multi-month low after reaching an all-time peak in September. Over the past ten weeks, they’ve fallen in nine, standing at $654.857 billion last week, according to RBI data. This, along with a higher trade deficit and sluggish growth figures, has made the rupee vulnerable, especially with outflows from domestic equity markets.
On the data front, the US Personal Consumption Expenditures (PCE) Price Index rose 2.4% year-on-year in November, softer than the 2.5% expectation, while the US Core PCE, excluding food and energy, climbed 2.8% YoY, below the 2.9% forecast.
Despite the rupee’s current struggles, the USD/INR pair maintains a long-term bullish outlook. It trades firmly above the 100-day Exponential Moving Average (EMA) on the daily chart. With the 14-day Relative Strength Index (RSI) above the midline at around 65.40, the path of least resistance seems upward. Bullish candlesticks could push the pair towards the ascending channel at 85.20, and further gains may lead to a rally up to 85.50. On the downside, the lower boundary of the channel, 84.88, serves as the initial support, and a break below could lead to the 100-day EMA at 84.19.
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