18/09/24

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The Indian Rupee (INR) remained stable during Wednesday’s Asian trading session, following a recent growth to a month-high of 83.75. The currency is currently facing pressure from heightened expectations surrounding potential Federal Reserve rate cuts and significant sales of the US Dollar. However, rising crude oil prices may limit further depreciation of the INR against the USD.

As the day progresses, traders are focused on the upcoming decision from the Federal Reserve regarding interest rates. Speculation is dominant that the Fed will lower rates during its forthcoming meeting, and the announcement of the Summary of Economic Projections will provide crucial insights into the central bank’s outlook for rate adjustments in the coming year. Anticipation of these substantial cuts could cast a selling pressure on the US Dollar in the short term.

Latest domestic economic figures reveal that India’s Wholesale Price Index-based inflation decreased to a four-month low of 1.31% year-over-year in August, down from 2.04% in the previous reading. This figure was notably lower than the expected 1.80%. Additionally, India’s merchandise trade deficit expanded to $29.65 billion in August from $23.5 billion in July, according to data from the Ministry of Commerce and Industry. On a positive note, India’s foreign exchange reserves reached an unprecedented high of $689.2 billion as of September 6, according to the Reserve Bank of India.

In the U.S., Retail Sales experienced an unexpected increase of 0.1% month-over-month in August, surpassing the anticipated decline. Industrial Production also saw a rise of 0.8% month-over-month, contrasting with a previous decrease. Fed funds futures now indicate a nearly 63% probability of a 50 basis points rate cut, a significant increase from the 30% chance a week ago, while a 25 basis point cut stands at 37%.

From a technical perspective, the outlook for USD/INR remains optimistic despite the current stability. The pair continues to oscillate within a defined range, reinforcing a bullish sentiment over the longer term, especially with prices maintaining above the 100-day Exponential Moving Average. However, potential downside risks are present, as indicated by the Relative Strength Index positioning below the midpoint. The critical resistance level appears to be between 83.90 and 84.00, while initial support is found around 83.70, below which further declines are possible.