- The Indian Rupee weakens during Thursday's Asian session.
- Increased liquidity entering the Indian market, coupled with a dovish Fed, weighs on the US Dollar.
- Traders look ahead to Thursday’s release of US weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales.
The Indian Rupee (INR) weakens as the US Dollar (USD) recovers on Thursday. However, the INR's downside may be limited following the US Federal Reserve’s (Fed) significant rate cut at its September meeting, which could weigh on the USD. Additionally, continuous Foreign Institutional Investor (FII) inflows into Indian equities might provide support for the local currency.
On the other hand, a further rise in crude oil prices could pressure the INR, as India is the world’s third-largest oil consumer after the United States and China. Looking ahead, investors are focused on the upcoming release of US weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales, due later on Thursday.
Daily Digest Market Movers: Indian Rupee edges lower, but downside potential remains limited
- Reserve Bank of India (RBI) is unlikely to lower its benchmark policy rate in 2024 due to uncertainty surrounding food inflation, according to State Bank of India (SBI) Chairman C.S. Setty.
- Finance Minister Nirmala Sitharaman stated on Wednesday that India is standing out globally in terms of economic growth and will continue to do so in the coming years.
- The Federal Open Market Committee (FOMC) reduced the federal funds rate by 50 basis points (bps) to a range of 4.75% to 5.00%, marking the Fed’s first rate cut in over four years.
- Fed Chair Jerome Powell emphasized during a press conference that the half-point rate cut does not signal a new trend for the central bank, but reflects policymakers’ intention to maintain a healthy economy and labor market.
- Fed policymakers updated their quarterly economic forecasts, raising the median unemployment projection for the end of 2024 to 4.4% from the previous 4% forecast in June. Additionally, the long-run federal funds rate projection was increased to 2.9% from 2.8%.
Technical Analysis: USD/INR's bullish outlook remains fragile in the long term
The Indian Rupee weakens slightly today. The USD/INR pair has broken below a consolidation pattern on the daily chart, casting doubt on the bullish outlook as the price lingers around the critical 100-day Exponential Moving Average (EMA). A close below this EMA could signal further downside momentum. Meanwhile, the 14-day Relative Strength Index (RSI) remains in the bearish zone, hovering around 38.0, indicating that the path of least resistance is to the downside.
The 100-day EMA at 83.64 serves as the initial support for the pair. A break below this level could trigger a decline to 83.31, the low from June 18. A further drop may lead to testing the 83.00 psychological level, attracting additional selling pressure.
On the upside, the first resistance appears near the 83.75 mark, a previous support level now acting as resistance. A more significant barrier lies in the 83.90-84.00 range.
