The Indian Rupee (INR) displayed a lack of movement during the Asian trading session on Monday, maintaining a steady position after experiencing a record low in the previous session. The currency bears the weight of significant foreign equity outflows, which have been exacerbated by expectations of a strengthening US dollar alongside rising US bond yields. Market analysts note that ongoing foreign withdrawals, amounting to over $1.5 billion in November and contributing to an $11 billion exit in October, continue to pressure the INR. However, a reduction in crude oil prices, which provides some relief since India is a substantial oil consumer, along with potential intervention from the Reserve Bank of India (RBI), may limit further declines.
The stance of the RBI is crucial, as it has been known to step in and sell dollars in an effort to support the INR. This interaction, combined with an overall cautious sentiment in the market, keeps investors alert ahead of the upcoming release of India’s Consumer Price Index (CPI) for October. The CPI data, expected to reflect a yearly inflation rise from 5.49% in September to 5.80% in October, could influence policy and sentiment moving forward.
Moreover, the Indian equity markets reflect ongoing volatility, with the Nifty 50 and BSE Sensex seeing declines recently, marking five weeks of downturns in the past six. The Nifty index has diminished by over 8% from its peak in late September. As traders assess these developments, particular attention will also be focused on broader economic indicators, including the US CPI report due later in the week.
From a technical perspective, the outlook for the USD/INR pair remains bullish. It continues to trade above the significant 100-day Exponential Moving Average, though it faces signals of being overbought. If buying momentum persists, it could lead the pair toward a resistance level of 84.50, with a potential psychological barrier at 85.00 beyond that. Conversely, slips below recent trend channel limits could trigger movement towards lower support levels, specifically the 100-day EMA at approximately 83.83 and further down to 83.46.
