The Indian Rupee experienced a rebound in Monday’s trading session, benefitting from a decline in crude oil prices and a weaker US Dollar. Despite ongoing foreign equity outflows that have put pressure on the Rupee, anticipated interventions from the Reserve Bank of India (RBI) could help stabilize the currency’s performance in the coming days. Market participants are keenly awaiting commentary from Federal Reserve officials to gain further insights into monetary policy direction.
This month has seen significant selling activity from foreign portfolio investors, who have offloaded a net total of $8.4 billion from Indian markets, surpassing the prior record outflow of $8.35 billion recorded in March 2020. Statements from the Atlanta Fed President signal a cautious approach to interest rate cuts, projecting potential reductions in the central bank’s policy rate to between 3% and 3.5% by the end of next year. Moreover, traders are currently anticipating a nearly 92.6% probability of a 25 basis point cut at the upcoming November meeting, according to the CME FedWatch tool.
In the U.S. housing market, recent data indicated a 2.9% decrease in building permits for September, falling from 1.47 million the previous month to 1.428 million, which was below analysts’ expectations. Additionally, housing starts decreased by 0.5%, coming in at 1.354 million, slightly above the consensus estimate.
From a technical perspective, the outlook for the USD/INR pair remains bullish on the daily chart, with prices trading above the upward trend line and the significant 100-day Exponential Moving Average. The Relative Strength Index is positioned above the midpoint, suggesting potential for further upward movement. Key levels to watch include the all-time high of 84.15, which, if consistently surpassed, could propel the USD/INR pair toward 84.50 and eventually the psychological barrier of 85.00. Conversely, if the currency breaches the trend line support around 84.00, it may retest previous lows near 83.71 and the critical 100-day EMA at around 83.00.
