USD/INR holds steady ahead of Indian PMI release

• The Indian Rupee steadies in Friday’s Asian session.
• Continued outflow of foreign funds and higher crude oil prices might weigh on the INR.
• Investors will monitor the preliminary HSBC India PMI, which is due on Friday.

The Indian Rupee (INR) trades flat on Friday after hitting an all-time low of 84.50 against the US Dollar (USD) in the previous session. The significant sell-off in domestic equity markets and the rebound in crude oil prices amid the escalating geopolitical tensions between Russia and Ukraine exert some selling pressure on the local currency. 

However, the routine intervention from the Reserve Bank of India (RBI), with state-run banks offering USD in the market, might help limit the INR’s losses. Looking ahead, traders will keep an eye on the preliminary HSBC India Manufacturing Purchasing Managers Index (PMI) and Services PMI for November. On the US docket, the flash US S&P Global PMI data and the final Michigan Consumer Sentiment will be released.

Indian Rupee remains vulnerable due to persistent outflows

• RBI Governor Shaktikanta Das noted on Thursday that robust growth in the Indian economy has provided the Indian central bank with the flexibility to focus on inflation, aiming for a sustainable decline toward the target of 4%.
• Portfolio outflows, persistent USD demand, and some concerns about a slowdown in the Indian economy are likely to keep the INR on a path of gradual depreciation, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities. 
• The US Initial Jobless Claims fell to 213K for the week ending November 16, down from 219K (revised from 217K) in the previous week, according to the US Department of Labor on Thursday. This figure came in below the market consensus of 220K.
• The US Existing Home Sales climbed 3.4% in October to a seasonally adjusted annual rate of 3.93 million units from an increase of 3.83 million in September.
• Chicago Fed President Austan Goolsbee said on Thursday that it may make sense to slow the pace of Fed rate cuts as inflation is on its way down to 2%. 

USD/INR’s positive picture remains intact, but bearish RSI divergence teases sellers

The Indian Rupee trades on a flat note on the day. The USD/INR pair remains capped under an ascending trend channel. However, the bullish outlook of the pair prevails as the price holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. Meanwhile, a correction or a further consolidation cannot be ruled out as USD/INR made a new high but the 14-day Relative Strength Index (RSI) did not make a corresponding new high, as indicated by the bearish RSI divergence. 

The first upside barrier emerges at the all-time high and the upper boundary of the trend channel of 84.50. Any follow-through buying above this level could pave the way to the 85.00 psychological level.

On the flip side, extended losses below the lower limit of the trend channel of 84.36 could expose the 84.00-83.90 zone, representing the round mark and the 100-day EMA.