USDINR Range-Bound As Market Waits For NFP Data

Summary:
• USDINR slowed down its gains on Friday despite the rupee being under pressure from high oil prices. Could the NFP data break the deadlock?

USDINR traded flat on Friday as the rupee continued to be under pressure from multiple fronts. The currency pair was at 83.52 at the time of writing, with the dollar up by 0.12 percent against the rupee on the weekly chart. The rupee made substantial gains last week, leveraging India’s debut at the JP Morgan Emerging Markets Bond Index to snap a four-week losing streak against the dollar.

However, the USDINR got upward propulsion this week as elevated global crude oil prices weighed down on the rupee. India’s status as the world’s third-largest importer of dollar-denominated oil makes the rupee susceptible to pressure when the commodity’s prices rise. Oil prices have been on the uptrend in recent days, and are on course to register the fourth successive weekly gain. Benchmark Brent price was up by 2.8 percent on the weekly chart, while West Texas Intermediate was up by 2.9 percent. 

Furthermore, US crude inventories declined by 12.157 million barrels as per the latest EIA data released on Wednesday, far higher than the forecast decline of minus 0.4 million barrels. That supports the projected spike in oil demand in the summer, and will likely keep prices elevated in the coming week.

The Indian rupee is supported by the HSBC India Services PMI, which beat forecasts in June, coming in at 60.5 versus the projected 60.4. However, traders expect fresh volatility later on Friday when the US June NFP data comes out. Expectations are currently high that the Fed will slash interest rates from September, following a decline in inflation rate in May. Therefore, the NFP figures will broaden the perspective and provide clearer guidance on the likely action by the Fed.

Technical analysis

USDINR is currently neutral, with the pivot around 83.47. The upside will likely continue if the action stays above that mark, and the first resistance could come at 83.50.  A move past that mark will strengthen the upward momentum, potentially sending the pair to test 83.52. Alternatively, the sellers will have the upper hand if USDINR breaks below 83.47. In that case, the first support could come at 83.44, and a breach below that mark will invalidate the upside narrative. Also, it could fuel the downside momentum to move lower and test 83.42.