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USDINR Headed South As Market Awaits PCE Data

USDINR declined for the second successive session on Friday, trading at 83.39 at 13:30 IST, down marginally from the day’s opening rate of 83.43. The pair is under pressure as investors reposition themselves for the first day of India’s inclusion in the JP Morgan Emerging Markets Fund Index. However, the US dollar is expected to weigh in when the PCE data comes out later on Friday.

India will join the $213 billion JP Morgan EM Index on Friday, a momentous moment for the country’s bond market and the wider economy. With over $10 billion worth of foreign inflows already in, the sentiment around the Index will certainly strengthen the rupee further. Also, the Reserve Bank of India is upbeat about India’s economic prospects, with the RBI Governor Shaktinta Das stating this week that the country had built a strong foundation upon which it could realise a sustained annual GDP growth rate of 8 percent.

The highlight of the day, however, will be the release of the US Personal Consumption Expenditure (PCE) figures for May. Inflation was a key talking point in Thursday’s Presidential Debate between President Joe Biden and Former President Donald Trump, and PCE figures are a key indicator of inflation trajectory.

The Core PCE Price Index is expected to have declined to 2.6 percent in May from 2.8 percent on an annual basis. On the other hand, the monthly figure is forecast to decline to 0.1 from 0.2 percent growth the previous month.

Technical analysis

The momentum on the USDINR trading pair signals control by the sellers, as indicated by the RSI. The downside is likely to continue if resistance remains at 83.36. That could see the first support established at 83.33, but extended control by the sellers could break the support and move the pair lower to test 83.30. Alternatively, a move above 83.36 will signal control by the buyers, but the upside will likely encounter another resistance at 83.40. Extended control by the buyers at that point will breach the resistance, and invalidate the downside narrative. Also, it could propel USDINR further up to test 83.42.