The Indian Rupee saw a flat trading day in the Asian session on Wednesday, following a month-high of 83.75 in the previous session. The pair is facing pressure from expectations of a deeper Federal Reserve rate cut and robust US Dollar sales. However, the recovery of crude oil prices may help limit losses for USD/INR. All eyes are on the Fed interest rate decision scheduled for Wednesday, with expectations of a rate cut in the September meeting. The Fed officials will release a Summary of Economic Projections after the meeting, which could provide insight into future rate cuts.
India’s Wholesale Price Index-based inflation dropped to a four-month low of 1.31% YoY in August, below market consensus of 1.80%. The country’s merchandise trade deficit increased to $29.65 billion in August compared to $23.5 billion in July. India’s foreign exchange reserves reached a record high of $689.2 billion as of September 6, according to the RBI. In the US, Retail Sales unexpectedly rose by 0.1% MoM in August and Industrial Production increased by 0.8% MoM, exceeding market estimates. The CME Fedwatch Tool indicates a 63% probability of a 50 bps rate cut and a 37% chance of a 25 bps cut.
In terms of technical analysis, the USD/INR pair remains flat on the day, oscillating within a rectangle on the daily chart. However, the longer-term outlook remains positive as the pair is holding above the 100-day EMA. The 14-day RSI is in the bearish zone below the midline, supporting sellers for now. The 83.90-84.00 zone is a strong resistance level, with the next barrier at 84.50. On the downside, support is seen at 83.70, with the 100-day EMA at 83.64. Overall, the bullish sentiment prevails in the longer term for USD/INR.
In conclusion, the Indian Rupee is facing pressure from Fed rate cut expectations and US Dollar sales, but higher oil prices may help limit losses. The focus is on the Fed interest rate decision, with expectations of a rate cut at the September meeting. India’s economic indicators, including WPI-based inflation and trade deficit, showed mixed results. The technical analysis suggests a positive outlook for USD/INR in the longer term, with resistance levels at 83.90-84.00 and support levels at 83.70 and 83.64. Traders should monitor the Fed’s decision and economic data releases for further direction in the USD/INR pair.
