USD/INR receives support as traders adopt caution ahead of US PMI data

23 Sep 2024, 05:15 by Lallalit Srijandorn · FXStreet

Indian Rupee loses ground in Monday’s early European session.
Robust foreign inflows may limit the downside of the INR.
Investors will monitor the US PMI data for September on Monday.

The Indian Rupee (INR) breaks its winning streak on Monday. However, the upside of the USD/INR pair could be restrained due to positive momentum in Indian equity markets amid a massive inflow of foreign funds. Nonetheless, a further rise in crude oil prices and renewed US Dollar (USD) demand from importers might cap the upside for the local currency.

Moving on, the flash reading of the US Purchasing Managers Index (PMI) data for September is due on Monday. Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee and Fed’s Atlanta President Raphael Bostic are scheduled to speak later in the day. Any signs of weaker US economic data or dovish remarks from the Fed officials could undermine the Greenback.

Daily Digest Market Movers: Indian Rupee depreciates due to market caution ahead of US PMI data

The HSBC India Manufacturing PMI eased to 56.7 in September from the previous reading of 57.5.
India's foreign exchange reserves rose by $223 million to a new all-time high of USD 689.458, according to the Reserve Bank of India (RBI) data released on Friday.
India is estimated to become the world’s third-largest economy by 2030–2031, according to S&P Global India. The country is forecast to grow at an annual rate of 6.7%.
Philadelphia Fed President Patrick Harker noted on Friday that the US central bank has effectively navigated a challenging economy over the last few years. Harker added that there is a risk that inflation decline could stall and the labor market could soften.
Fed Governor Michelle Bowman said cutting interest rates by a half percentage point this week risked signaling the Fed was declaring victory over inflation too early, per Bloomberg.
Fed Governor Christopher Waller stated on Friday that the decision to cut interest rates by an accelerated 50 bps was the right choice, but we can see a lot of room to move down in the next 6 to 12 months, adding that the Fed could even pause, depending on the data.

Technical Analysis: USD/INR is looking oversold in the shorter-term

The Indian Rupee strengthens on the day. The bearish outlook of the USD/INR pair remains in play as the price holds below the key 100-day Exponential Moving Average (EMA) on the daily chart. Further consolidation of the pair cannot be ruled out before positioning for any near-term USD/INR depreciation as the 14-day Relative Strength Index (RSI) stands near 26.40, indicating an oversold condition.

The 100-day EMA at 83.62 acts as the first upside barrier for USD/INR. The 84.00 psychological level appears to be a tough nut to crack for USD/INR bulls.

On the other hand, the low of June 19 at 83.30 acts as an initial support level for the pair. Extended losses could see a drop to the 83.00 round mark.

Economic Indicator

S&P Global Composite PMI

The S&P Global Composite Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging US private-business activity in the manufacturing and services sector. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the private economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for USD.