The Indian Rupee (INR) has continued its decline, reaching near-record lows during early trading on Thursday. This depreciation is attributed to disappointing economic indicators from India, significant portfolio outflows, and a strengthening US Dollar (USD). Investors are particularly focused on the upcoming release of the US weekly Initial Jobless Claims and the Goods Trade Balance later in the day.
Despite efforts by the Reserve Bank of India (RBI) to support the currency, the INR is facing pressure from robust USD demand and concerns about the health of India’s economy. The sentiment has been dampened further by outflows from Indian portfolios, largely influenced by shifts in the US political landscape. However, the fall in crude oil prices may help mitigate some losses for the rupee, given India’s status as the third-largest global oil consumer.
Economic indicators reveal a slowdown in service sector growth within India, as evidenced by the HSBC Services PMI which registered at 58.4 in November, down from 59.2 in October and below market expectations. Similarly, service sector growth in the US also showed a decline, signifying a potentially cautious economic environment. This slowdown has raised eyebrows among investors, particularly as they await crucial economic data including the RBI’s interest rate decision and the Nonfarm Payrolls data.
The USD/INR currency pair remains in an uptrend on the daily charts, holding above the critical 100-day Exponential Moving Average. Despite this positive trajectory, the presence of bearish divergence on the 14-day Relative Strength Index (RSI) hints at a potential weakening of the upward trend, suggesting that a reversal could occur in the near future. Traders are watching significant levels for potential movement; resistance is noted near the all-time high of 84.77, with psychological barriers at 85.00 and 85.50. Conversely, if the currency falls below the support at 84.60, it could drop to 84.22, and possibly even reaching the support level at 84.02, with the 100-day EMA serving as a critical line of defense.
