USD/INR extends gains ahead of Indian Services PMI data

• Indian Rupee loses momentum on Thursday despite the weaker USD. 
• The rise in crude oil prices and higher US Treasury bond yields exert some selling pressure on the INR. 
• The final reading of Indian HSBC Services PMI for March is due on Thursday.

Indian Rupee (INR) extends its downside on Thursday. The rise in crude oil prices to their highest levels since October amid the ongoing geopolitical tensions in the Middle East, along with higher US Treasury bond yields, weighs on the INR. Nonetheless, the USD/INR’s upside might be capped by the dovish remarks from the Federal Reserve (Fed) and the possible foreign exchange intervention from the Reserve Bank of India (RBI) to keep the domestic currency relatively strong. 

Investors will monitor the final reading of the Indian March HSBC Services PMI on Thursday. The attention will shift to the RBI interest rate decision on Friday. The Indian central bank is likely to keep its key repo rate steady at 6.50% at its April meeting and maintain its stance of withdrawal of accommodation, according to a majority of analysts. On the US docket, the US February Goods Trade Balance and weekly Initial Jobless Claims will be released on Thursday. On Friday, the US employment data, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings for March, will be closely watched. 

Daily Digest Market Movers: Indian Rupee remains amid global headwinds

• Citing six brokers, Reuters reported the RBI’s soon-to-be-implemented regulation saying exchange-traded rupee derivative transactions can be used only for hedging would cause volumes to plunge more than 80%.
• The World Bank forecasts the Indian economy to grow by 7.5% in 2024, revising its previous forecast by 1.2%. 
• The US Services PMI eased to 51.4 in March from 52.6 in February, weaker than the estimation of 52.7, according to the Institute for Supply Management (ISM). A measure of prices paid dropped to a four-year low, arriving at 53.4 versus 58.6 prior. 
• Private sector employment in the US rose by 184K in March from the 155K increase (revised from 140K) in February, above the market consensus of 148K, Automatic Data Processing (ADP) showed.
• Fed Chairman Jerome Powell emphasized that he doesn’t expect it will be appropriate to lower the policy rate until inflation is moving sustainably down toward the 2% target, keeping the timing of potential interest rate cuts uncertain.
• Fed Governor Adriana Kugler said on Wednesday that she believes inflation will continue to fall this year and pave the way for the central bank to cut interest rates.
• Atlanta Fed President Raphael Bostic stated that the central bank should not cut its benchmark interest rate until the end of this year, as he maintained his view that the Fed should cut the rate only once over the course of 2024.

Technical analysis: USD/INR maintains bullish stance in the longer term

The Indian Rupee trades softer on the day. USD/INR keeps the bullish vibe unchanged in the long term since the pair has risen above a nearly four-month-old descending trend channel since last week. 

In the near term, USD/INR holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is confirmed by the 14-day Relative Strength Index, which stands at around 68.75 in bullish territory and supports buyers for the time being. 

A break above a high of April 3 at 83.55 could spur a move to the next upside targets at an all-time high of 83.70 en route to the 84.00 psychological level. On the other hand, the first support level is seen near a high of March 21 at 83.20. A breach of this level could see a drop to the 83.00-83.50 region (round mark, the 100-day EMA), followed by a low of March 14 at 82.80.