The Indian Rupee (INR) saw a decline in Wednesday’s Asian session due to a strong demand for the US Dollar (USD) and significant foreign institutional outflows weighing on the currency. Traders are eagerly awaiting the US October Consumer Price Index (CPI) data, along with speeches from key officials for further direction.
The INR faced pressure as foreign institutional outflows and a surge in USD demand led to its decline. Despite these challenges, the downside for the currency may be limited thanks to routine interventions from the Reserve Bank of India (RBI) to stabilize the INR by selling the USD. The upcoming US CPI data release, as well as speeches from various officials, will be closely watched by traders to gauge the next moves in the currency market.
Retail inflation in India, based on the CPI, hit a 14-month high of 6.21% YoY in October, surpassing expectations. Food inflation also rose significantly, reaching 10.87%, while industrial production saw growth of 3.1% YoY in September. Additionally, foreign investors withdrew nearly $3 billion from local stocks in November, adding to the outflows seen in October. Federal Reserve officials in the US have commented on the current inflation situation, with most agreeing that it may remain above target levels.
Looking ahead, the USD/INR pair’s positive outlook remains intact in the longer term, although some consolidation may be expected in the near future due to overbought conditions. The daily chart shows the price holding above the key 100-day Exponential Moving Average (EMA), with a resistance level at 84.50. A break above this level could signal further bullish pressure towards the psychological level of 85.00. On the downside, support lies at 84.30, with further levels at 84.05-84.10 and 83.85, the 100-day EMA.
In conclusion, the Indian Rupee softened in Wednesday’s session due to external factors affecting the currency. While challenges remain, the INR’s downside may be limited by intervention from the RBI. Traders are closely monitoring the US CPI data release and speeches from key officials for further market direction. Despite the current difficulties, the USD/INR pair’s positive outlook remains strong in the long term, with potential for continued appreciation in the future.
