• Wed. May 22nd, 2024

The USD/INR Gains Some Ground, and All Eyes Are on the US CPI Report

Leon Kramer

ByLeon Kramer

Apr 11, 2024
The USD/INR Gains Some Ground, and All Eyes Are on the US CPI Report

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  • The Indian Rupee relinquishes its recent advances due to the resurgence in demand for the US Dollar. 
  • The sales generated by banks, the decrease in crude oil prices, and India’s strong growth prospects could potentially restrict the downside of the INR. 
  • Investors will be keeping a close eye on the US March CPI inflation report and the FOMC Minutes on Wednesday.

The Indian Rupee (INR) experiences a setback on Wednesday as the US Dollar (USD) makes a slight recovery. The markets adopt a more cautious stance in anticipation of the crucial US inflation data, which is projected to reveal a significant increase in inflation. Nevertheless, the USD/INR pair could potentially find some support from the sales of foreign and state-run banks, as well as the decline in crude oil prices. Additionally, the strong growth prospects in the Indian economy may help limit the upward movement of the pair. 

Wednesday will see the highly anticipated release of the US March Consumer Price Index (CPI) report, along with the FOMC Minutes, making it a day of significant importance. These events may provide insights into the direction of inflation and the Federal Reserve’s approach to monetary policy. In India, the market will remain closed on Thursday to observe the festival of Eid al-Fitr. Focus will turn to the upcoming Indian CPI inflation report for March and Industrial Production for February, set to be released on Friday. 

The Indian Rupee Experiences a Decline as Market Sentiment Remains Cautious

  • According to a report by India Ratings and Research (Ind-Ra), eight states in India are projected to have an economy surpassing $1 trillion as the country progresses towards its goal of becoming a developed nation by FY47. 
  • RBI Governor Shaktikanta Das stated that inflation is edging closer to the desired targets, with a projected retail inflation of 4.5% for the current year. However, the ongoing fluctuations in food prices remain a persistent obstacle.
  • Based on RBI Governor Shaktikanta Das, the central bank can maintain its focus on inflation due to India’s promising growth prospects.
  • According to Chicago Fed President Austan Goolsbee, the recent jobs report showed significant strength. However, he emphasized the importance of the central bank carefully considering the duration it can sustain its current interest rate position without causing harm to the economy.
  • In the words of Neel Kashkari, President of the Minneapolis Fed, the labor market is no longer extremely strong, but it is still characterized by limited availability of jobs. According to him, his fundamental assumption is that inflation will continue to decrease.  
  • According to the CME’s FedWatch tool, the probability of a rate cut in June has decreased to around 57%, while the likelihood of a cut in July has fallen below 75%.

The Longer-Term Outlook for USD/INR Remains Optimistic

The Indian Rupee is experiencing a slight decline in trading today. The bullish stance of USD/INR remains intact in the long term as the pair has surpassed a descending trend channel that has been in place for almost four months since March 22. 

Currently, the USD/INR pair is trading above the important 100-day Exponential Moving Average (EMA) on the daily chart. The RSI for the past 14 days continues to stay above the midline of 50, suggesting that the support zones are more inclined to remain intact rather than being breached.

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A significant level of support is expected to form around the intersection of the psychological round figure and the 100-day EMA in the 83.00–83.50 range. Another negative aspect to keep an eye on is a low point reached on March 14th at 82.80, followed by another low on March 11th at 82.65.

Looking at the positive side, the initial target for an increase is around the low of April 2nd, which is at 83.30. Heading in a more northerly direction, the subsequent obstacle can be found close to a peak reached on April 5th at 83.45, on the way to achieving an unprecedented high of 83.70.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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