USD/INR trades with slight gains, all eyes on Fed’s Powell testimony

• The Indian Rupee is trading in negative territory on Tuesday.
• Local currency falls due to firm US dollar and fears of disruption in US oil supplies
• Investors will be closely watching Fed Chairman Jerome Powell’s testimony on Tuesday.

The Indian Rupee (INR) weakens on Tuesday amid a recovery in the Dollar. The local currency loses traction as concerns over Tropical Storm Beryl disrupting US oil supplies weigh on sentiment. However, rising bets on a September rate cut by the US Federal Reserve (Fed) following Friday’s US jobs data signaled a slowdown in the US labor market, which could undermine the US Dollar (USD).

Fed Chair Jerome Powell’s semi-annual monetary policy testimony before US lawmakers on Tuesday will be closely watched. This event “could be an opportunity for him to share whether the odds of a September rate cut have improved with the latest data,” said an analyst at ING bank. Chairman Powell’s dovish comments could drag the dollar lower and limit the pair’s upside.

Daily Market Wrap: Indian Rupee Sensitive to Global Headwinds

• India is likely to set its fiscal deficit target for FY25 at 5.1% of GDP in the upcoming budget, according to Goldman Sachs.
• India’s employment growth rate stood at 6% this fiscal year as against 3.2% in the previous fiscal year. The total additions to the workforce of 46.7 million were the highest since 1981-82, the Reserve Bank of India (RBI) report showed on Monday.
• “Offers by state-run banks capped rupee gains around 83.44, and they were also on offer near 83.48 in the second half (of the session),” said a foreign exchange trader at a foreign bank.
• According to the CME FedWatch tool, traders are now pricing in a nearly 76% chance of a Fed rate cut in September, up from 71% last Friday.
• The US CPI is projected to show a 3.1% year-over-year increase in June, compared with a 3.3% increase in May. Core inflation is projected to remain stable at 3.4% year-over-year in June.

Technical Analysis: USD/INR Enters Short-Term Consolidation Phase

The Indian Rupee is losing ground on the day. The USD/INR pair maintains the bullish vibe unchanged above the 100-day exponential moving average (EMA) on the daily chart.

In the near term, however, the pair remains confined within a familiar trading range since March 21, with the 14-day Relative Strength Index (RSI) hovering around the midline of 50. This indicates that further consolidation is underway.

The potential resistance level for the pair will emerge at 83.65, the upper limit of the trading range. Extended gains could pave the way towards the all-time high of 83.75, followed by the psychological barrier of 84.00.

On the downside, the initial support level for USD/INR lies at 83.35, the 100-day EMA. A decisive break below this level will drag the pair towards the round figure of 83.00. The next contention level to watch is 82.82, a low from January 12.