The Indian Rupee (INR) is trading flat on Friday, as traders await the release of the US February employment report, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. The outlook for the INR is mixed, influenced by several domestic and global factors. While persistent Foreign Institutional Investor (FII) outflows may exert some downward pressure on the currency, a decline in crude oil prices may offer some support. India, as the world’s third-largest oil consumer, stands to benefit from lower oil prices, which could help reduce the trade deficit and bolster the INR.
Additionally, the Reserve Bank of India (RBI) is expected to maintain a dovish stance, with some market expectations pointing to further interest rate cuts. This could weigh on the INR, as lower interest rates generally reduce the attractiveness of the currency. On the other hand, the RBI’s foreign exchange intervention may prevent the INR from depreciating significantly.
Global Market Volatility and Trump’s Tariffs Affect Market Sentiment
The INR is also impacted by the ongoing global market volatility, largely sparked by US President Donald Trump’s tariffs. On Thursday, Trump issued an executive order exempting goods from Mexico and Canada under the US-Mexico-Canada Agreement (USMCA) from the 25% tariffs he had imposed earlier in the week. This move provided some temporary relief to market sentiment, but the overall uncertainty surrounding the trade policies continues to create market instability.
US economic data, such as the Initial Jobless Claims, showed a better-than-expected drop to 221K for the week ending March 1, compared to the consensus estimate of 235K. However, Continuing Jobless Claims increased by 42K to 1.897M. These mixed signals suggest that the US economy is experiencing some strain, which adds to the broader uncertainty.
USD/INR Technical Outlook: Steady with a Constructive Bias
Despite consolidation in the near term, the bullish outlook for the USD/INR pair remains intact. The pair is holding above the key 100-day Exponential Moving Average (EMA) on the daily chart, and the 14-day Relative Strength Index (RSI) is hovering near the midline at 50, indicating that consolidation or sideways movement is likely in the short term.
The immediate resistance level for USD/INR is at 87.53, the high of February 28. A sustained break above this level could trigger a rally toward an all-time high near 88.00, potentially extending to 88.50. On the downside, support is seen at the low of February 21 at 86.48. A further decline below this level could target the next support at 86.14, the low of January 27, followed by 85.60, the low of January 6.
Focus on US NFP Data
Traders are closely monitoring the US NFP report, which is expected to show the addition of 160,000 jobs in February, with the unemployment rate likely holding steady at 4.0%. Average Hourly Earnings are forecast to rise by 0.3% compared to the previous month. The report will offer insights into the strength of the US labor market and provide clues about the Federal Reserve’s future interest rate decisions. The outcome of this report could significantly impact the USD/INR pair, with any surprises potentially causing further volatility.
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