The Indian Rupee (INR) is experiencing a downturn during Tuesday’s Asian trading session, primarily due to a dim domestic market environment and ongoing foreign capital outflows. After a brief recovery from its record low in the previous trading day, the INR remains under pressure as strong demand for the US Dollar (USD) continues. The decline is exacerbated by a significant drop in local stock indices, highlighting the fragility of the Indian currency in the face of external and local economic challenges.
Market participants are particularly attentive to upcoming data, such as the US ISM Services Purchasing Managers Index (PMI) scheduled for later Tuesday. The economic landscape will be further shaped by the release of the minutes from the Federal Reserve’s December meeting the following day, as well as the critical Nonfarm Payrolls (NFP) report due on Friday. These indicators could provide insights into the state of the US economy and influence USD valuation further.
On a domestic note, the HSBC final India Services PMI for December registered a decline to 59.3, down from an earlier estimate of 60.8, and falling short of a consensus prediction of 60.5. However, there are signs that forward-looking indicators, such as new business and future activity, may signal continued robust performance in the upcoming period.
The USD/INR currency pair is on an upward trajectory, having recently breached an ascending trend channel and now trading above the significant 100-day Exponential Moving Average (EMA). The Relative Strength Index (RSI) has also climbed above the 70.00 threshold, indicating a potential oversold condition that could lead to market consolidation. The critical resistance level is seen at the historical peak of 85.84, which could open the door to the psychological benchmark of 86.00 if surpassed. Conversely, an initial support level is established at 85.60, with further significant support at 85.00 and then at 84.45, aligning with the 100-day EMA.
