USD/INR continues to rise as fears of escalation drive a risk-off sentiment

The Indian Rupee (INR) is weakening today, pressured by renewed demand for the US Dollar (USD). The risk-off sentiment stemming from escalating geopolitical tensions in the Middle East is boosting safe-haven flows, favoring the Greenback. Additionally, rising crude oil prices are applying further selling pressure on the INR, as India ranks as the third-largest oil consumer, following the United States and China.

Looking ahead, investors are closely watching the US September ISM Services Purchasing Managers Index (PMI), the weekly Initial Jobless Claims, and the final S&P Global Services PMI, all set for release later on Thursday. Attention will also shift to the US September employment data on Friday, including Nonfarm Payrolls (NFP), the Unemployment Rate, and Average Hourly Earnings. A weaker-than-expected jobs report could lead the central bank to consider deeper rate cuts, which might exert additional pressure on the USD.

Daily Digest Market Movers: Indian Rupee Remains Vulnerable Amid Multiple Headwinds

• The HSBC final India Manufacturing PMI slipped to an eight-month low of 56.5 in September, falling short of market expectations of 56.7 and the previous reading of 57.5.
• Pranjul Bhandari, HSBC’s chief India economist, noted that "momentum in India's manufacturing sector softened in September compared to the robust growth in the summer months."
• According to the Reserve Bank of India's (RBI) real effective exchange rate (REER) index, the Indian Rupee was valued at 5.5% above its fair value in August, down from 7.7% in the previous month.
• The US ADP Employment Change data for September outperformed expectations, with 143,000 new jobs added, exceeding the median forecast of 120,000 and the previous reading of 103,000 (revised from 99,000).
• Richmond Fed President Thomas Barkin stated on Wednesday that the Fed's efforts to bring inflation back to its 2% target may take longer than anticipated, limiting the extent to which interest rates can be cut.

Technical Analysis: USD/INR Maintains a Constructive Bias

The Indian Rupee is softening today, and the daily timeframe shows a positive outlook for the USD/INR pair as it remains above the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) has crossed above the midline at approximately 60.30, indicating that the uptrend is more likely to continue than reverse.

The critical resistance level for the pair is at the psychological mark of 84.00. Sustained bullish momentum above this level could open the path to 84.15, the high reached on August 5, with the next upside barrier seen at 84.50.

Conversely, initial support for USD/INR is at 83.80, the low from October 1. A break below this level could push the pair down to the 100-day EMA at 83.64, followed by the round number at 83.00, which also marks the low from May 24.