USD/INR trades with mild gains, bolstered by US Dollar demand

• The Indian Rupee weakens in Tuesday’s early Asian session.
• Month-end USD demand and higher crude oil prices weigh on the INR. 
• Traders await the US August CB’s Consumer Confidence ahead of the key events later this week. 

The Indian Rupee (INR) trades on a weaker note on Tuesday. The US Dollar (USD) demand from local banks and corporates during the month-end, and a surge in crude oil prices are likely to cap the local currency’s gains. On the other hand, the upside of the pair might be limited due to the dovish remarks from US Federal Reserve (Fed) Chair Jerome Powell at the Jackson Hole Symposium, which have triggered the possibility of a deeper rate cut in the September meeting. 

Investors will keep an eye on the US Conference Board’s Consumer Confidence for August on Tuesday. The advanced US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) and Personal Consumption Expenditures (PCE) Price Index data will be closely watched this week. On the Indian docket, the GDP Quarterly for Q1 will be published on Friday. 

Daily Digest Market Movers: Indian Rupee remains vulnerable amid global factors and challenges

• “We expect the rupee to trade with a slight positive bias on risk in global risk sentiments amid dovish Fed speak and rising expectations of a rate cut by the Fed in September. However, geopolitical tensions in the Middle East and rising crude oil prices may cap the sharp upside,” said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
• India's economic growth likely expanded at its slowest pace in a year in the April-June quarter due to lower government spending, according to a Reuters poll. 
• San Francisco Fed President Mary Daly said on Monday that "the time is upon us" to cut interest rates, likely starting with a quarter-percentage point reduction in borrowing costs, per Reuters. 
• Richmond Fed President Thomas Barkin stated on Monday that he will take a 'test and learn' approach to rate cuts. 
• The US Durable Goods Orders increased $26.1 billion, or 9.9%, to $289.6 billion in July, from a -6.9% contraction in June. This figure was above the market consensus of a 4% increase and marked the most significant gain since May 2020.
• Futures are currently pricing in a near 40% odds of a half-percentage point cut in interest rates.

Technical Analysis: USD/INR remains bullish in the longer term

The Indian Rupee trades softer on the day. The USD/INR pair maintains a positive outlook above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, the price has crossed below the three-month-old uptrend line, while the 14-day Relative Strength Index (RSI) hovers around the midline, suggesting further consolidation cannot be ruled out. 

The support-turned-resistance level at the 84.00 psychological mark acts as an immediate upside barrier for USD/INR. Further north, the next target emerges at the record high of 84.24 en route to 84.50. 

On the downside, the initial support level is located at 83.77, the low of August 20. A break below the mentioned level will see a drop to the 100-day EMA at 83.57.