- Summary:
- USDINR has been on the ascending trajectory for the last three weeks but a shift in key fundamentals has brought downward pressure.
USDINR traded flat on Tuesday with the rupee aided by a shift in supply-side outlook for oil and India’s inflation trajectory. The pair was at 84.02 at the time of writing, with the dollar’s underlying bullish momentum limiting the rupee’s upside. The USDINR has been on an ascending trajectory in the last three weeks, with its gains year-to-date standing at 1.1 percent.
India’s Consumer Price Index (CPI) rose higher-than-expected for the second successive month in September, coming in at 5.49 percent versus the forecast figure of 5.00 percent. This marks a return above the Reserve Bank of India’s target of 4 percent after previously falling below that mark in July and August. It also affirms the view that the Reserve Bank of India will keep the current 6.5 percent interest rate regime for longer, thus favouring a stronger rupee.
The rupee also gets tailwinds from falling global crude oil prices after it was widely reported that Israel’s response against Iran’s missile attacks will avoid the country’s oil infrastructure. India is the world’s third-largest importer of crude oil, and the decline in the commodity’s price translates to reduced demand for the dollar. Meanwhile, the Fed is expected to slash US interest rates by 25 percent in November, thus limiting the dollar’s gains.
USDINR Prediction
USDINR pivots at 84.04, and the momentum indicators favour a continuation of the downside below that mark. With the sellers in control, the pair will likely find initial support at 84.00. However, if they extend that control, it could enable a break below that level to test 83.98.
Conversely, moving above 84.04 will favour the buyers. In that case, the first hurdle could come at 84.08. If the upward momentum strengthens, it could enable a break above that level, which could invalidate the downside narrative. Meanwhile, the upside could extend to the next barrier at 84.10.
