USD/INR turns red ahead of Indian Trade Balance, US data

• Indian Rupee recovers some lost ground on Friday despite the stronger US Dollar. 
• India’s Wholesale Price Index-based inflation dropped to a four-month low, weaker than expected. 
• Investors will focus on the Indian Trade Balance data and US preliminary Michigan Consumer Sentiment, due on Friday. 

Indian Rupee (INR) recovers from its recent losses on Friday. However, the upside of the INR might be limited as the upbeat US February Producer Price Index (PPI) data prompted investors to pare the odds of a June rate cut by the Federal Reserve (Fed). Furthermore, the weaker-than-expected Indian WPI Inflation exerts some selling pressure on the INR and creates a tailwind for the USD/INR pair. India’s wholesale inflation for February cooled to a four-month low, according to the statistics ministry on Thursday. This report could form the basis for the Indian central bank’s monetary policy actions.

Nonetheless, the markets expect the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to hold the interest rate steady in the next meeting and might cut the repo rate in the second half of the calendar year 2024. The RBI is unlikely to precede the Fed in this rate cut cycle. This, in turn, might lift the Indian Rupee and cap the upside of the pair. Moving on, Investors will keep an eye on the Indian Trade Balance data, due on Friday. Also, the US Industrial Production and the preliminary Michigan Consumer Sentiment will be released later in the day.

Daily Digest Market Movers: Indian Rupee remains strong amid the multiple headwinds 

• India’s Wholesale Price Index-based inflation dropped to a four-month low, dropping to 0.20% YoY in February from 0.27% in January, worse than the market expectation of 0.25%.
• The Indian WPI Food climbed 6.95% YoY in February from the previous reading of 6.85%, while the WPI Fuel fell by 1.59% YoY from a 0.51% drop in January. 
• The Indian WPI Manufacturing Inflation for February came in at -1.27% YoY versus -1.13% prior. 
• US Retail Sales jumped 0.6% MoM in February from a downwardly revised -1.1% in the previous month, below the market consensus of a 0.8% m/m rise.
• The US PPI figure rose 0.6% MoM in February from 0.3% MoM in January, while the Core PPI figure climbed 0.3% MoM from a 0.5% gain in January.
• The US weekly Initial Jobless Claims for the week ending March 9 decreased by 1,000 to 209,000 from the previous week’s print of 210,000, better than the market expectation of 218,000.

Technical Analysis: Indian Rupee continues its rangebound movement between 82.60 and 83.15 in the longer term

Indian Rupee trades strongly on the day. USD/INR remains stuck within a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023. 

From a technical perspective, USD/INR keeps the bearish vibe in the near term as the pair holds below the key 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) returns above the 50.0 midlines, indicating that further upside cannot be ruled out for the time being. 

The first upside barrier for the pair will emerge near 83.00, portraying the confluence of the 100-day EMA and a psychological round figure. Any follow-through buying will pave the way to the upper boundary of the descending trend channel near 83.15. A bullish breakout of this level could signal that buyers are taking over and could allow USD/INR to reach the next upside target near a high of January 2 at 83.35, followed by the 84.00 round mark. 

On the other hand, a low of March 14 at 82.80 acts as an initial support level for the pair. The critical support is located at the lower limit of the descending trend channel at 82.60. A break below 82.60 could drag the pair lower to a low of August 23 at 82.45, and finally a low of June 1 at 82.25.