USD/INR strengthens ahead of Indian CPI data

• The Indian Rupee edges lower in Tuesday’s Asian session. 
• Sustained outflows from local equities weigh on the INR. 
• Investors will monitor India’s October Consumer Price Index (CPI) and Fedspeak on Tuesday.

The Indian Rupee (INR) remains weak near an all-time low on Tuesday. The downward pressure for the local currency is pressured by persistent foreign fund outflows and a muted trend in domestic equities. Additionally, the renewed US Dollar (USD) demand from oil companies and foreign banks contributes to the INR’s downside. 

Nonetheless, the significant depreciation of the INR might be capped by the decline in crude oil prices and the likely foreign exchange intervention by the Reserve Bank of India (RBI). Looking ahead, traders brace for India’s October Consumer Price Index (CPI), which is due on Tuesday. On the US front, the Federal Reserve’s (Fed) Christopher Waller, Thomas Barkin, Neel Kashkari and Patrick Harker are scheduled to speak later in the day. On Wednesday, the attention will shift to the US October CPI inflation data. 

Indian Rupee slips to near a fresh low, hurt by outflows from local equities

• Foreign investors have withdrawn more than $2.5 billion from Indian stocks over November so far, adding to the $11 billion of outflows in October.
• "In the medium term, the rupee is expected to trade within the 83.80 to 84.50 range, as the Reserve Bank seems to cap the downside of the rupee with sufficient Forex reserves in its kitty," said Amit Pabari, CR Forex Advisors MD. 
• India's foreign exchange reserves declined by $2.675 billion to $682.13 billion for the week ended November 1, the RBI said on Friday.
• The Indian Rupee could undergo a depreciation of 8%-10% against the US Dollar with Trump's return to power, even as the local currency recorded an all-time low of 84.38 on Monday, according to the State Bank of India (SBI). 
• The Indian CPI is expected to show an increase of 5.80% YoY in October versus 5.49% prior. 
• The markets have priced in nearly 65.3% of the 25 basis points (bps) rate cut by the Fed at the December meeting, down from 75% last week, according to the CME FedWatch Tool.  

USD/INR keeps the bullish vibe in the longer term, though overbought RSI suggest caution 

The Indian Rupee weakens on the day. The strong uptrend of the USD/INR pair remains intact, with the pair holding above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. However, further consolidation looks favorable before positioning for any near-term USD/INR appreciation as the 14-day Relative Strength Index (RSI) exceeds 70, indicating an overbought condition.

The first upside barrier for USD/INR emerges at 84.50. A strong rally past the mentioned level could clear the way for the 85.00 psychological level.

In the bearish event, any follow-through selling below the lower limit of the trend channel and the high of October 11 in the 84.05-84.10 zone could see a drop to 83.84, the 100-day EMA. Further south, the next support level to watch is 83.46, the low of September 24.