The Indian Rupee (INR) remains under pressure on Tuesday, following a rebound from its record low in the previous session. The local currency continues to face weakness amid broad-based demand for the US Dollar (USD). This, coupled with a sharp decline in domestic equity markets and persistent foreign capital outflows, has contributed to the INR’s ongoing downside.
The Reserve Bank of India (RBI) is expected to step in to prevent further significant losses in the INR. Investors are also closely monitoring developments surrounding the incoming U.S. administration under President-elect Donald Trump. Analysts speculate that if U.S. tariffs turn out to be lower than those promised during Trump’s campaign and are focused only on critical sectors, global growth prospects could improve, potentially weakening the USD.
Later on Tuesday, the U.S. ISM Services Purchasing Managers Index (PMI) will be released. On Wednesday, the minutes from the Federal Reserve’s (Fed) December meeting will be published, providing additional insight into the central bank’s policy outlook. Market participants will also focus on the U.S. Nonfarm Payrolls (NFP) report set to be released on Friday.
Indian Rupee Faces Challenges Amid Mixed Data
The INR’s continued weakness is exacerbated by domestic and global challenges. The final India Services PMI for December was reported at 59.3, down from the preliminary reading of 60.8 and below the expected 60.5. However, forward-looking indicators, such as new business and future activity, suggest that the strong performance of the services sector may continue in the near future, according to Ines Lam, economist at HSBC.
On the global front, Trump denied a Washington Post report that suggested his aides were considering narrowing the scope of his tariff plan to target only critical imports. Meanwhile, Fed Governor Lisa Cook indicated that policymakers might adopt a more cautious approach to rate cuts due to resilient labor market conditions and persistent inflationary pressures. The U.S. ISM Services PMI is expected to improve to 53.0 in December, up from 52.1 in November.
Technical Outlook for USD/INR
The USD/INR pair continues to show a bullish bias, as it has broken above its ascending trend channel over the past week and is trading above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) has crossed the 70.00 threshold, signaling overbought conditions. This suggests that further gains could be limited in the short term, with consolidation being a possibility.
The immediate resistance level for USD/INR is at an all-time high of 85.84. A sustained move above this level could set the stage for the psychological barrier of 86.00. On the downside, the low of January 6 at 85.60 offers initial support. Further support levels are located at 85.00 and 84.45, the 100-day EMA, which could provide additional price stability.
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