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USD/INR strengthens ahead of Fed Chair Powell’s second testimony

  • Indian Rupee is down in Asian trading on Wednesday.
  • Renewed demand for the US dollar could weigh on the local currency, while sustained foreign flows into India could support the INR.
  • Fed Chairman Jerome Powell’s second testimony will be in focus on Wednesday.

The Indian Rupee (INR) is trading lower on Wednesday amid a modest rebound in the US Dollar (USD). Persistent demand for the Dollar from local importers could continue to limit the local currency’s gains. However, sustained foreign flows into India, a positive economic outlook and faster macroeconomic growth among major economies could contribute to the INR’s upside.

Traders will focus on Federal Reserve (Fed) Chairman Jerome Powell’s second semi-annual testimony on Wednesday. Attention will shift to the US Consumer Price Index (CPI) inflation data on Thursday. The US CPI is projected to show a rise of 3.1% on a yearly basis in June, while core inflation is expected to remain stable at 3.4% on a yearly basis. Any dovish comments from Fed’s Powell or signs of softer US inflation could put some selling pressure on the Dollar.

Daily Market Wrap: Indian Rupee Weakens Despite Upbeat India Outlook

  • The Reserve Bank of India said on Monday that the country added 46.7 million jobs in the fiscal year ended in March, the highest figure since 1981-82.
  • India’s central bank added $5.6 billion in gold reserves in the June quarter, with foreign currency assets increasing by $1.9 billion and the value of gold in reserves rising by $3.8 billion. As of June 28, India’s foreign exchange reserves stood at $652 billion.
  • Fed Chairman Jerome Powell said in Tuesday’s testimony before Congress that the case for interest rate cuts is strengthening as the latest inflation data showed some modest further gains.
  • Powell added that “more good data” could open the door to interest rate cuts. He noted that keeping interest rates too high for too long could jeopardize economic growth.
  • Powell’s comments have helped boost the likelihood of a September rate cut by the Fed to more than 75%, up from 71% before last Friday’s U.S. jobs data, according to the CME’s FedWatch tool.

Technical Analysis: USD/INR remains in short-term consolidation mode

The Indian Rupee is trading weaker on the day. The bullish bias in the USD/INR pair continues as the pair holds above the key 100-day exponential moving average (EMA) on the daily chart.

In the near term, further consolidation looks favorable as the pair has remained trapped within a familiar trading range since March 21. Moreover, the 14-day Relative Strength Index (RSI) showed neutral momentum, hovering around the midline of 50.

A sustained bullish momentum could lift the USD/INR to 83.65, the upper limit of the trading range. A break above this level could attract some buying interest towards the all-time high of 83.75 en route to the psychological barrier of 84.00.

On the other hand, the 100-day EMA at 83.36 acts as an initial support level for the pair. Extended losses will expose the round mark of 83.00, followed by 82.82, a low of January 12.

US Dollar Price Today

The table below shows the percentage change of the US Dollar (USD) against the major currencies listed today. The US Dollar was the strongest against the New Zealand Dollar.

USD 0.00% -0.01% 0.02% 0.04% 0.12% 0.42% 0.04%
EUR 0.00% -0.01% 0.01% 0.05% 0.11% 0.41% 0.04%
GBP -0.01% 0.00% 0.02% 0.05% 0.12% 0.43% 0.05%
CAD -0.02% -0.01% -0.01% 0.03% 0.11% 0.48% 0.03%
AUD -0.04% -0.06% -0.05% -0.04% 0.08% 0.38% 0.00%
JPY -0.12% -0.10% -0.11% -0.10% -0.04% 0.31% -0.07%
NZD -0.42% -0.42% -0.43% -0.41% -0.38% -0.31% -0.38%
CHF -0.05% -0.04% -0.05% -0.03% 0.00% 0.07% 0.38%

The heatmap shows the percentage changes of the major currencies relative to each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the chart will represent EUR (base)/JPY (quote).

Source: Fx Street

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