The Indian Rupee (INR) remains stable, hovering near a historic low during Thursday’s Asian trading session. Factors contributing to this stagnation include significant equity outflows and a robust performance of the US Dollar. Investors are keenly awaiting the release of India’s Wholesale Price Index (WPI) inflation data set for Thursday, especially in light of corresponding US economic indicators such as the Producer Price Index (PPI).
Recent trends highlight a concerning drop in foreign investments, with nearly $3 billion withdrawn from Indian stocks in November following an $11 billion outflow in October. This substantial capital flight correlates with a more than 9% decline in Indian equity indices since their late September peak. In the United States, the Consumer Price Index (CPI) increased by 2.6% year-over-year in October, consistent with market expectations. The core CPI, which filters out food and energy prices, also matched predictions at a 3.3% rise.
Federal Reserve officials shared varied perspectives on interest rate adjustments. The Kansas Fed President noted that past rate cuts reflect confidence in decreasing inflation, but offered no specific guidance on future rate changes. Meanwhile, the St. Louis counterpart expressed concerns that persistent inflation could complicate further rate easing, while the Dallas Fed President suggested a cautious approach to avoid re-igniting inflationary pressures.
Currently, the INR trades flat, with the USD/INR exchange rate remaining above the critical 100-day Exponential Moving Average (EMA). This positioning suggests a higher likelihood of an upward trend continuation. However, the market may witness some consolidation before any significant gains materialize, as indicators signal that the currency pair is in an overbought state.
Key resistance levels to watch include 84.50 for USD/INR, which, if surpassed, could propel the exchange rate towards the psychological mark of 85.00. Conversely, the support level around 84.32 might serve as a buffer against downward movements. A fall below this point could lead to further declines, potentially testing levels between 84.05 and 84.10, which represent both a trend channel’s lower boundary and previous highs. The critical next support level to monitor is 83.86, marked by the 100-day EMA, as breaching this may indicate a shift toward a longer-term downtrend.
