The Indian Rupee has shown strength in Thursday’s Asian session, supported by foreign inflows into Indian markets and a drop in crude oil prices. However, the potential rate cuts by the US Federal Reserve could cap the INR’s upside, especially with the high oil prices impacting India as the third largest consumer of crude oil globally. The upcoming US June Consumer Price Index (CPI) inflation data release will be closely monitored to determine any potential changes in the Fed’s policy direction.
With a slight bearish bias expected for the Indian Rupee due to weakness in the domestic market and a positive tone in the US Dollar, the Fed Chair Jerome Powell’s recent statements regarding interest rate decisions based on data rather than political factors have influenced market sentiment. Powell emphasized the importance of greater confidence in inflation reaching the Fed’s 2% target before considering rate cuts. The US CPI projected increase for June could impact the Fed’s policy stance, with a quarter of investors anticipating no rate changes in September.
Technically, the USD/INR pair is holding above the key 100-day Exponential Moving Average on the daily chart, maintaining an uptrend. The pair’s consolidation is expected to continue in the near term, with a neutral momentum supported by the 14-day Relative Strength Index. Key resistance levels to watch include the all-time high of 83.75 and the psychological barrier of 84.00, while support levels stand at the 100-day EMA at 83.36 and the 83.00 round mark.
In the past 7 days, the US Dollar has experienced varying percentage changes against major currencies, with the Pound Sterling showing strength against the USD. The USD was weakest against the GBP, while the EUR, CAD, AUD, JPY, NZD, and CHF also saw fluctuations in their exchange rates with the Greenback. The Fed’s monetary policy decisions impact the USD’s strength, with interest rate adjustments influencing investor sentiment and the value of the currency.
The Federal Reserve plays a critical role in shaping US monetary policy, with a focus on achieving price stability and fostering full employment. The Fed adjusts interest rates to control inflation and encourage borrowing when needed. Fed officials assess economic conditions at eight policy meetings per year, making decisions that impact the US Dollar’s value. In extreme situations, the Fed may use Quantitative Easing (QE) or Quantitative Tightening (QT) to stimulate or tighten the flow of credit in the financial system, further influencing the USD’s value.
Overall, the Indian Rupee’s performance is influenced by various factors, including foreign inflows, crude oil prices, and US monetary policy decisions. The upcoming US CPI data release will provide further insights into the Fed’s stance on interest rates, which could impact the USD/INR pair’s trajectory. Traders and investors will continue to monitor economic indicators and geopolitical developments to gauge the direction of the Indian Rupee against the US Dollar in the coming days.
