The Indian Rupee (INR) has been facing pressure in recent trading sessions, with sellers entering the market during the early Asian session on Wednesday. This downward movement can be attributed to the weakening of Asian currencies and increased demand for the US Dollar (USD) from importers. However, despite these challenges, positive developments in the domestic market and dovish comments from Fed Chair Jerome Powell at the recent Jackson Hole meeting may provide some support to the INR.
Investors are eagerly awaiting speeches from the Fed’s Christopher Waller and Raphael Bostic, scheduled for later in the day. Additionally, the release of the US Gross Domestic Product (GDP) Annualized for the second quarter and the Indian GDP Quarterly for the first quarter of fiscal 2024-25 will likely impact market sentiment. According to the International Monetary Fund (IMF), India’s real GDP growth is forecasted to reach 7% in 2024, making it the fastest-growing major economy globally.
Despite the challenges faced by the Indian Rupee, technical indicators suggest a relatively positive outlook for the currency. The pair remains above the key 100-day Exponential Moving Average (EMA) on the daily timeframe, indicating a bullish trend. The 14-day Relative Strength Index (RSI) is also above the midline, suggesting that the support level is likely to hold.
In the event of further bullish momentum, the next barrier for USD/INR is the support-turned-resistance level at 84.00. A sustained move above this level could open the doors to further gains towards 84.24 and 84.50. On the flip side, the low of August 20 at 83.77 serves as an initial support level, with extended losses potentially testing the 100-day EMA at 83.60.
The Indian Rupee is highly sensitive to external factors such as the price of Crude Oil, the value of the US Dollar, and levels of foreign investment. The Reserve Bank of India (RBI) plays a critical role in maintaining stability in the FX markets through interventions and interest rate adjustments. Macro-economic factors like inflation, interest rates, GDP growth rate, balance of trade, and foreign investments also influence the Rupee’s value.
The Indian Rupee faces both internal and external challenges that impact its performance in the foreign exchange market. While the current market sentiment remains somewhat positive, ongoing developments in the US economy, as well as domestic factors, will play a crucial role in shaping the future direction of the INR. Traders and investors should closely monitor key levels and events to make informed decisions in the forex market.
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