The Indian Rupee (INR) experienced further depreciation during the Asian trading session on Wednesday. Concerns over potential trade tariffs from the former U.S. President, which could significantly impact imports, have provided strength to the U.S. Dollar (USD), exacerbating the decline of the INR. The cautious tone from the Federal Reserve also suggests short-term support for the USD, making it difficult for the INR to find footing.
However, there are factors that could mitigate the extent of the INR’s downturn. Notably, substantial foreign investments linked to the recent rebalancing of global equity indexes are likely to contribute positively. The Reserve Bank of India (RBI) might also step in to stabilize the currency, preventing a too-significant fall.
On Wednesday, market participants will be monitoring key economic indicators, including the Core Personal Consumption Expenditures (PCE) Price Index for October, as well as initial jobless claims, pending home sales, the Chicago PMI, and durable goods orders. These indicators are crucial for understanding economic health and may affect market expectations.
Despite the ongoing challenges facing the INR, the rebalancing activity in indices has generated a surge in interest from foreign investors, with net purchases exceeding $1 billion in recent weeks. Despite the weak performance of the INR, various sectors of the Indian economy are showing signs of growth, suggesting resilience in the market.
In terms of technical analysis, the USD/INR currency pair remains on a bullish path, trading within an ascending trend channel. The pair has consistently maintained levels above the 100-day Exponential Moving Average (EMA). A critical resistance area lies between 84.50 and 84.55, which marks the all-time high. If the momentum holds above these levels, the market could aim for the psychological barrier of 85.00. Conversely, support is seen around 84.24, with further levels of interest at 83.94 and 83.65, indicating where potential price corrections could stabilize.
