- The Indian Rupee strengthens during Wednesday’s early European session.
- Enhanced risk sentiment and a softer USD boost the INR.
- Investors look ahead to the US August New Home Sales data and Fed Governor Kugler's speech later on Wednesday.
The Indian Rupee (INR) strengthened on Wednesday, supported by improved risk sentiment following China's stimulus measures and a weaker US Dollar (USD). However, rising crude oil prices, outflows linked to adjustments in the FTSE equity indexes, and renewed USD demand from major Indian importers could introduce some downward pressure on the INR.
Market participants are also awaiting the release of the US New Home Sales data for August on Wednesday, with further insights expected from US Federal Reserve (Fed) Governor Adriana Kugler’s speech. Any dovish comments from Fed officials could potentially weigh on the Greenback against the Indian Rupee. The key focus for the week will be Friday's release of the US August Personal Consumption Expenditures (PCE) Price Index.
Daily Digest Market Movers: Indian Rupee holds steady amid global risk-on sentiment
- S&P Global Ratings on Tuesday maintained India's GDP growth forecast at 6.8%, while indicating that the Reserve Bank of India (RBI) may consider cutting interest rates in October.
- "We expect the rupee to trade with a positive bias, supported by improved global risk appetite following China's stimulus and a softer dollar. However, elevated crude oil and commodity prices could limit significant gains," said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
- The US Conference Board's Consumer Confidence Index dropped to 98.7 in September, down from a revised 105.6 in August, marking the largest decline since August 2021.
- On Tuesday, Fed Governor Michelle Bowman noted that key inflation indicators remain "uncomfortably above" the 2% target, urging caution as the Fed moves to cut interest rates. She favored a 25 basis point reduction, aligning with traditional central bank actions.
- According to the CME FedWatch Tool, markets have priced in a 56% chance of a second 50 basis point rate cut in the November meeting, with a 44% probability of a 25 basis point reduction.
Technical Analysis: USD/INR's bearish outlook remains intact in the long term
The Indian Rupee is trading stronger today, with the bearish view on USD/INR persisting as the pair remains capped below the 100-day Exponential Moving Average (EMA) on the daily chart. The downward bias is further reinforced by the 14-day Relative Strength Index (RSI), which hovers below the midline at around 36.00.
The first support target for the pair is at 83.44, the low from September 23. A break below this level could lead to a decline toward the critical psychological support at 83.00, the low from May 24.
However, sustained trading above the 100-day EMA at 83.62 could open the door to the former support-turned-resistance at 83.75, with a major barrier at the 84.00 round number.
