USD/INR gains ground, investors await the Indian, US CPI data

• Indian Rupee remains on the defensive after reaching a record low of 83.42.
• The markets anticipate the RBI would intervene in the FX market to limit the INR’s depreciation.
• The India and US Consumer Price Indexes (CPI) will be closely watched events.

Indian Rupee (INR) loses traction on Monday. The local currency bounces off the all-time low of 83.42 against the US Dollar (USD) on Friday. The pressure on the Indian rupee was exacerbated by an outage of the interbank order matching system, which potentially prompted the Reserve Bank of India (RBI) to intervene to calm the market. The markets anticipate the RBI would systematically defend the local currency as it has in previous months. However, the RBI’s move might depend on the US inflation data on Tuesday.

The US Consumer Price Index (CPI) is expected to rise 0.1% MoM in October and the core measure is estimated to grow 0.3% MoM. The stronger-than-expected reading might raise the probability of a Fed rate hike in the December or January meeting. Furthermore, India’s CPI will be released later on Monday, which is forecasted to rise 4.8% YoY in October. The markets will be closed on Tuesday on the occasion of Diwali Balipratipada.

Daily Digest Market Movers: Indian Rupee weakens amid the multiple challenges

• The Reserve Bank of India (RBI) Governor Shaktikanta Das expressed optimism about India's economic outlook but cautioned that the path to becoming a prosperous society may not be smooth.
• RBI’s Monetary Policy Committee (MPC) in its October meeting, anticipates India’s Consumer Price Index (CPI) at 5.4% for 2023–24, from 6.7% in 2022–23.
• According to RBI Governor Das, India is still sensitive to recurring and overlapping food price shocks, and monetary policy is still focused on maintaining inflation at the 4% target.
• RBI forecasts that India's GDP will grow at a 6.3% annual rate in the current fiscal year.
• The University of Michigan's Consumer Sentiment Index declined to 60.4 in November from the previous month's 63.8, below the expectation of 63.7.
• The US 12-month inflation expectations rose to 4.4% from 4.2%, while the 5-year expectations surged to 3.2% from 3.0%.
• Federal Reserve (Fed) Bank of San Francisco President Mary Daly said she is not yet ready to say if the central bank has completed its interest rate-hiking cycle to bring back inflation to 2%.
• Fed Chair Jerome Powell said that if it becomes appropriate to tighten policy further, the central bank will not hesitate to do it.

Technical Analysis: The Indian Rupee’s bearish bias remains intact

The Indian Rupee trades with a soft note on the day. The USD/INR pair has broken above the trading range of 83.00–83.30 since September. According to the daily chart, USD/INR maintains a bullish vibe as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA).

A high of November 10 at 83.42 acts as an immediate resistance level for the pair. A decisive break above 83.42 will see a rally to a psychological round figure at 84.00. On the flip side, the initial contention level will emerge near a resistance-turned-support level at 83.30. A key support level is seen at 83.00, representing the confluence of a low from October 24 and a round mark. The additional downside filter to watch is a low of September 12 at 82.82.