The Indian Rupee (INR) remained relatively stable during the Wednesday Asian trading session, holding back after hitting a record low of 84.92 the previous day. This steady position comes amid ongoing foreign fund outflows and a downward trend within local equity markets, both of which could exert additional pressure on the currency. Furthermore, a widening merchandise trade deficit in November adds to concerns regarding the INR’s future performance. However, the Reserve Bank of India’s consistent interventions to support the currency by selling U.S. dollars through state banks may mitigate more significant declines.
Traders are keeping a close watch on the U.S. Federal Reserve’s interest rate announcement, which is slated to be a focal point this Wednesday. Expectations lean toward the Fed implementing a modest rate reduction of 0.25%. Market participants are particularly attentive to any comments from the Fed Chair, as well as the accompanying Summary of Economic Projections. Dovish signals could bolster the U.S. dollar, potentially exacerbating the pressures facing the INR.
The INR’s current position indicates it is maintaining a flat trajectory. Positive sentiment surrounding the USD/INR pair continues as it consistently trades above the crucial 100-day Exponential Moving Average (EMA). This upward trend is bolstered by a Relative Strength Index (RSI) reading hovering near the 68.15 level, reflecting an encouraging outlook for further gains.
Resistance for the USD/INR pair initially appears near the upward trend channel and the psychological level of 85.00. If trading persists above this threshold, it may attract additional buyers and drive the pair towards 85.50. Conversely, the lower boundary of the trend channel, identified at 84.80, serves as a preliminary support level. A bearish reversal could bring attention back to the recent low of 84.22 and, if breached, could expose further downside potential at 84.15, aligning with the 100-day EMA.
