USD/INR extends its downside, all eyes on US NFP data

• Indian Rupee drifts higher on Friday amid the softer Greenback. 
• The positive outlook in the Indian economy and capital inflows support the INR. 
• Investors await the US ISM Services PMI and the employment data on Friday. 

Indian Rupee (INR) gains momentum on Friday as the cautious comments by the Federal Reserve (Fed) Chair Jerome Powell exert further selling pressure on the US Dollar (USD). Furthermore, the positive sentiment in the Indian equity markets and the inflow of foreign capital boost the INR and cap the pair’s upside. 

Market players will keep an eye on the US ISM Services PMI and the employment data for April, due on Friday. The Nonfarm Payrolls (NFP)  is estimated to show 243K job additions in the US economy, while the Unemployment Rate is projected to remain steady at 3.8% in April. The unexpected weakening in the labor market could warrant a rate cut from the Fed, which weighs on the Greenback. 

Daily Digest Market Movers: Indian Rupee remains strong amid the positive sentiment 

• The HSBC final India Manufacturing Purchasing Managers' Index (PMI) declined to 58.8 in April from a 16-year high of 59.1 in March.
• FX intervention from the RBI in February was the lowest in six months, about one-eighth of the average monthly intervention from October to December, per Reuters. 
• QuantEco Research economist, Vivek Kumar, said that pressures on the Indian Rupee eased in the January-March compared to October-December, reducing the magnitude of intervention. 
• The Organisation for Economic Co-operation and Development (OECD) raised its growth forecast for India by 40 basis points (bps) to 6.6% for 2024-25. 
• The Initial Jobless Claims in the US for the week ended April 27 remained unchanged at 208K, better than the expectation of 212K. 
• The US Fed left interest rates unchanged on Wednesday and noted that it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are easing sustainably to its 2% target. 

Technical analysis: USD/INR keeps the bullish outlook in the longer term

The Indian Rupee trades weaker on the day. The constructive stance of USD/INR remains unchanged on the daily timeframe as the pair is forming an ascending triangle and holds above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) holds in the bullish territory around the 50 midline, indicating that further consolidation looks favorable for the time being. 

The confluence of the lower limit of the ascending triangle and the 100-day EMA at 83.15 act as an initial support level for USD/INR. A decisive break below this level will expose a low of January 15 at 82.78 and then pave the way to a low of March 11 at 82.65. On the upside, a high of May 1 at  83.50 will be the first upside target for the pair. A bullish breakout above the upper boundary of the ascending triangle of 83.71 will see a rally to the 84.00 psychological round mark.