USDINR Flashes Signs of A Decline As Upside Momentum Weakens

Summary:
• The Indian rupee has gained some ground against the US dollar despite a weakening of Indian manufacturing activity in April.

USDINR declined on Thursday, trading at 83.36 after losing 0.11 percent, with the pair ignoring a weaker-than-expected Indian PMI reading. The Indian rupee is making an attempt to snap a four-day losing streak against the US dollar, and soft US macroeconomic data released on Wednesday could provide tailwinds for the rupee.

 The US ISM Manufacturing PMI declined in April to 49.2 from March’s 50.3, falling below the forecast 50.0. Also, the JOLTs jobs openings figure for March came in at 8.488 million, which was less than the forecast figure of 8.680 million. However, the dollar will get support from a better-than-expected April ADP Nonfarm Employment Change figures, which came in at 192,000, exceeding the projected figure of 179,000. However, the figure was still a significant decline from March’s 208,000.

The Indian rupee will be under pressure after the HSBC India Manufacturing PMI reading for came in at 58.8, missing analysts’ forecast of 59.5. Furthermore, this is the first time in 2024 that the figure has declined month-on-month. Nonetheless, it signals that India’s factory activity is still strong, supporting a bullish outlook for the rupee.

Meanwhile, the Federal Reserve retained US interest rates at 5.5%, aligning with market expectations. In addition, Fed Chairman Jerome Powell stated that rate hikes were unlikely this year, with his comments interpreted by some traders as dovish for the dollar. However, the comments were not all that surprising, considering that the US economy grew slower than expected in the first quarter of the year. Looking ahead, the USDINR rate will likely get fresh volatility from Initial Jobless Claims figures on Thursday. Furthermore, Nonfarm Payrolls data and unemployment rate readings will provide new propulsion on Friday.

Technical analysis

The momentum on USDINR signals that the buyers are in control. The pair is likely to continue the upside if the buyers keep the price above 83.40. That could help them break above the resistance at 83.45, and potentially test 83.48 in extension. On the other hand, a move below 83.40 will favour the sellers to be in control, and support will likely be at 83.37. A continuation of control by the sellers will likely help them break the support, thereby reversing the upside narrative and potentially testing 83.34.