January 25, 2023
New Delhi, India
USDINR Analysis
In the dynamic world of currency exchange, the USDINR pair is experiencing upward movement, influenced by a mix of global economic factors. Here’s a breakdown of key elements shaping the current scenario:
US GDP Data Influence:
Investors are closely eyeing the forthcoming flash US Gross Domestic Product (GDP) growth numbers for Q4, anticipating potential impacts on rate-cut expectations in the United States. The outcome of this data release could significantly sway the value of the US Dollar against the Indian Rupee.
Indian Economic Outlook:
Despite a positive forecast of a 7.3% expansion in the Indian economy for the current fiscal year, the Indian Rupee faces downward pressure. Concerns related to rising inflation and elevated crude oil prices, driven by geopolitical tensions in the Middle East, are contributing to a cautious outlook for the INR.
Market Sentiment and Foreign Investments:
The Indian Rupee remains sensitive to higher inflation and oil prices. Foreign investors have shifted gears, selling approximately $2 billion worth of Indian equities in January, following net buys of $7.9 billion the previous month. The Reserve Bank of India (RBI) emphasizes the importance of maintaining an actively disinflationary monetary policy.
Monetary Policy and Inflation in India:
With core inflation in India hitting a four-year low in December, there’s speculation that the rate-setting panel may adjust its position to “neutral” in the upcoming month. The RBI is expected to target a narrower fiscal deficit for FY25 compared to FY24.
US Economic Indicators:
Positive indicators from the US, including the S&P Global Composite PMI signaling the fastest rise in business activity since June 2023, add another layer to the currency dynamics. Former St. Louis Federal Reserve President James Bullard’s remark on potential interest rate cuts before hitting 2% inflation also contributes to market expectations.
Technical Analysis of USD/INR:
From a technical standpoint, the USD/INR pair has been confined within the 82.80–83.40 range since September 2023. The pair is currently trending upward, holding above the key 100-period Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) around the 50.0 midline suggests a certain level of directionlessness in the short term.
Read more on: USD vs Indian Rupee
Key Levels to Watch:
For traders and investors, key resistance levels include 83.40, 83.47 (2023 high), and 84.00. On the downside, initial support levels are identified at 83.00, followed by 82.80 (lower limit of the trading range) and 82.60.
In conclusion, the USDINR exchange rate is navigating a complex landscape shaped by global economic data, geopolitical tensions, and technical indicators. Stay tuned for updates as the market responds to upcoming economic releases, including the US GDP data, and continues to reflect the ever-changing dynamics of the international financial landscape.
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