USD/INR loses traction on the lower US yields, eyes on US PCE data

• Indian Rupee attracts some buyers despite the stronger US growth number.
• The higher Treasury bond yields, Middle East geopolitical conflicts might cap the INR’s upside.
• Investors will monitor the US Core Personal Consumption Expenditures Price Index (PCE) data, which is expected to ease in September.

Indian Rupee (INR) holds positive ground on Friday. The USD/INR pair loses momentum on the lower US Treasury bond yields despite the upbeat US Gross Domestic Product (GDP) figures. Nonetheless, the Indian Rupee remains sensitive to market sentiment and the Middle East escalating tension headline could limit the INR’s upside in the near term.

Market participants will keep an eye on the US Core Personal Consumption Expenditures Price Index (PCE), due later on Friday. Next week, the attention will shift to the Federal Reserve’s Federal Open Market Committee (FOMC) meeting. The markets anticipate FOMC to keep the interest rate unchanged at its meeting scheduled for November 2.Furthermore, the Reserve Bank of India (RBI) is set to meet with top bank officials next week to discuss the current liquidity condition in the banking system.

Daily Digest Market Movers: Indian Rupee strengthens amid the uncertainty

• US Q3 GDP expanded at an annualized rate of 4.9%, above the market consensus of 4.2%.
• US Durable Goods Orders rose 4.7% MoM in September versus a 0.1% drop in August, beating market expectations of 1.5%.
• US Initial Jobless Claims for the week ending October 21 climbed to 210K from the prior week's data of 200K, exceeding estimates.
• US Continuing claims rose by 63,000, the highest reading since May.
• The Reserve Bank of India (RBI) is likely to meet with top bank officials next week to discuss the current liquidity condition in the banking system.
• The RBI's monetary policy committee said the central bank will continue monitoring on maintaining inflation at the 4% target.
• RBI estimated India's Gross Domestic Product (GDP) will grow at 6.5% in the current fiscal year.
• The International Monetary Fund (IMF) raised its forecast growth rate for India to 6.3% in October.
• RBI's October bulletin suggested growth in India is expected to gain momentum for the remainder of 2023.
• India’s Wholesale Price Index (WPI), a measure of inflation, dropped -0.26% YoY in September versus 0.52% prior, below the market expectation of 0.50%.

Technical Analysis: The Indian Rupee picks up bid above the critical support level

The Indian Rupee trades firmly on the day. The USD/INR pair trades within a range of 83.00-83.35. Meanwhile, the pair holds above the 100- and 200-day Exponential Moving Averages (EMA) on the daily chart, suggesting the upward bias remains intact for the pair.

That being said, any follow-through buying above 83.35 will see a rally to year-to-date (YTD) highs of 83.45. Further north, the next barrier will emerge at a psychological round mark at 84.00. On the flip side, the key contention level is located at 83.00, representing a low of October 20 and a round figure. A decisive break below the latter could see a drop to 82.82 (low of September 12), en route to 82.65 (low of August 4).