USDINR Stays In Range As Focus Shifts to Powell Speech

Summary:
• USDINR has been in range in recent days, but Tuesday's congressional speech by Fed Chairman Jerome Powell could inject new volatility.

USDINR was range-bound on Tuesday, trading at Rs 83.47 after inching up by 0.04 percent in the intraday session. The pair has been trading sideways for the last three sessions, underlining mixed momentum around the dollar and the yen. The rupee is strengthened by a positive jobs data, which showed that employment rate was at 6 percent this fiscal year, up from the previous year’s rate of 3.2 percent.

Meanwhile, the US dollar is under pressure from expectations of interest rate cuts based on the recent comments by Fed Chairman Jerome Powell on the inflation trajectory. Also, the rise in unemployment rate to 4.1 percent in June added to the pressure to slash the current 5.25-5.0% interest rates. 

The USDINR pair is under pressure from declining crude oil prices, which have strengthened the rupee in recent days. Dollar-denominated oil has ended the day lower in the last two trading sessions, and benchmark Brent was down by 0.4 percent at the time of writing.

Moving ahead, traders will have their attention to Powell’s testimony during the congressional presentation of the semiannual Monetary Policy Report on Tuesday. His speech is expected to provide insights into the relationship between the current inflation trajectory and the Fed’s next interest rate decision. US consumer Price Index (CPI) figures will be out on Thursday, and could see some investors opt against placing aggressive bets on the USDINR in the intervening period.

Technical analysis

The momentum on USDINR signals that the sellers are currently in control. The downside will likely continue if resistance persists at the 83.47 pivot mark, with the first support likely to be at 83.44. If the sellers extend their control, they could break the first support and build the momentum to push the pair to 83.41.

On the other hand, a move above 83.47 will favour the buyers to take control. The upside could encounter the first resistance at 83.48, and a breach of that mark will invalidate the downside narrative. Also, it could strengthen the upside to move the USDINR exchange rate to 83.50.