- The Indian Rupee (INR) weakens during Tuesday’s Asian session.
- Increased demand for the USD and rising oil prices pressure the INR, though expectations of a significant Fed rate cut may limit further losses.
- Key events to watch later on Tuesday include India’s WPI Inflation data and US Retail Sales figures.
The Indian Rupee (INR) dips on Tuesday, ending a three-day winning streak. Strong demand for the US Dollar (USD) from local importers, especially oil companies, weighs on the currency. Additionally, a rebound in crude oil prices may cap the INR's upside, as India ranks as the third-largest oil consumer after the US and China.
However, expectations of a significant Federal Reserve (Fed) rate cut, a softer USD, and substantial foreign investments in Indian equities could provide support for the INR's appreciation. Investors will be closely monitoring India's Wholesale Price Index (WPI) Inflation, along with the Food and Fuel reports for August. In the US, Retail Sales data, anticipated to rise 0.2% month-on-month in August compared to July's 1.0% increase, will also be key.
Daily Digest Market Movers: Indian Rupee Faces Pressure as Traders Eye Key Events
- India's Wholesale Price Index (WPI) Inflation is expected to slow to 1.80% year-on-year in August, down from 2.04% in July.
- Reserve Bank of India (RBI) Governor Shaktikanta Das estimates India's economic growth to exceed 7.5%, outpacing the RBI's current projection of 7.2% for the financial year.
- In the US, the NY Empire State Manufacturing Index rose to 11.5 in September, recovering from a 4.7 decline in August and beating expectations of a 3.9% drop.
- Fed fund futures reveal growing market bets on a 50 basis points (bps) rate cut by the US Federal Reserve, with traders now pricing in a nearly 67% chance, up from 50% last Friday, according to the CME FedWatch Tool.
- ING Bank analysts noted, "While we initially favored a 50bp cut, recent job and inflation data suggest Fed officials are more likely to opt for a 25bps cut."
Technical Analysis: USD/INR Outlook Remains Positive
The Indian Rupee weakens today, with the USD/INR pair maintaining its bullish outlook according to the daily chart, as it continues to trade above the key 100-day Exponential Moving Average (EMA). However, downside risks persist as the 14-day Relative Strength Index (RSI) remains in bearish territory below the midline.
A clear break above the 83.90-84.00 region, a former support level now acting as resistance, could trigger a rally towards the next upside target at 84.50.
On the downside, the September 16 low of 83.82 serves as the initial support for USD/INR. A sustained move below this level could open the door for further declines towards the 100-day EMA at 83.64.
