The Indian Rupee (INR) is facing significant pressure as it reached a new all-time low in its recent trading session. Contributing factors include disappointing domestic economic data, ongoing foreign capital outflows, and a renewed strength of the US Dollar (USD). Tensions have also arisen from statements made by US President-elect Donald Trump, who hinted at potential tariffs on BRICS nations should they undermine the dollar, adding further strain to the INR.
Despite these challenges, the Reserve Bank of India (RBI) is expected to intervene as needed, which may limit the rupee’s decline. Traders are now focusing on key economic indicators, including the US Job Openings and Labor Turnover Survey (JOLTs) for October. In addition, discussions from Federal Reserve officials are anticipated, alongside critical announcements from the RBI regarding interest rates and the upcoming US Nonfarm Payrolls for November.
Recent reports reveal a decline in India’s Manufacturing Purchasing Managers Index (PMI), which fell to 56.5 in November from 57.5 in October, slightly below market expectations. This is a sign that manufacturing activity is experiencing a slowdown, although it remains in expansion territory.
India’s foreign exchange reserves have also experienced a reduction, decreasing by $1.31 billion to $656.582 billion as of the week ending November 22. Conversely, US manufacturing data showed unexpected improvement in November, with the ISM Manufacturing PMI rising to 48.4 from a previous 46.5, though it still reflects contraction.
Furthermore, sentiment among Federal Reserve officials regarding potential interest rate cuts appears to be evolving, with some expressing a preference for a rate reduction while stressing the need for additional data to inform their decisions.
From a technical perspective, the USD/INR exchange rate remains in a bullish trend, maintaining a position above the critical 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) suggests an overbought condition, indicating the possibility of consolidation before a potential rise in the exchange rate. The 85.00 level presents a significant resistance point, and trading above this could lead to further bullish momentum, while a retreat could see the pair test lower support levels.
