USD/INR holds positive ground, US GDP data looms

• Indian Rupee drifts lower amid the modest rebound of the USD.
• The Reserve Bank of India’s (RBI) monthly bulletin emphasized a strong warning on inflation.
• Market players will focus on the US GDP for Q3, due later on Thursday.

Indian Rupee (INR) trades on the weaker side on Thursday. The Reserve Bank of India’s (RBI) monthly bulletin emphasized that if headline retail inflation is not brought down to the medium-term target of 4% and tethered there, it could underscore the potential impact on growth.

Indian headline retail inflation rate rose 5.55% in November, worse than the market expectation. According to the RBI's latest estimations, Consumer Price Index (CPI) inflation is seen averaging 4% in July-September 2024. RBI governor Shaktikanta Das stated that reaching 4% should not just be a one-off event, the MPC should have confidence that 4% has become durable.

Investors will monitor the US Gross Domestic Product Annualized (Q3), due later on Thursday. The growth number is projected to remain steady at 5.2%. The attention will shift to November’s Core Personal Consumption Expenditures Price Index (PCE) on Friday, which is estimated to grow 0.2% MoM and 3.3% YoY, respectively.

Daily Digest Market Movers: Indian Rupee stays vulnerable amid the elevated inflation

• India’s foreign exchange reserves stood at $606.9 billion on December 8, 2023, the fourth highest among major foreign exchange reserve-holding countries, having increased by
• $28.4 billion during 2023–24.
• India's total outstanding bonds traded in the market surged to $2.47 trillion in the September quarter from $2.34 trillion in the March quarter.
• According to the RBI's monthly Bulletin, the RBI sold $310 million in the spot foreign currency market in October.
• The International Monetary Fund (IMF) has reclassified India's exchange rate regime from floating to a stabilized arrangement.
• Consumer confidence in the United States increased by the most since early 2021, rising to 110.7 in December from 101.0 the previous month (revised down from 102.0).
• The annual rate of Existing Home Sales jumped to 3.82 million in November, above the market consensus of 3.77 million.
• The market expects the Fed to hold its benchmark rate steady at its January meeting but could begin cutting it as soon as March, according to the CME FedWatch Tool.

Technical Analysis: Indian Rupee to remain range-bound between 82.80 and 83.40

Indian Rupee trades weaker on the day. The USD/INR pair has remained stuck within the 82.80–83.40 range since September. Technically, USD/INR holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, further challenges to the key EMA cannot be ruled out as the 14-day Relative Strength Index (RSI) lies below the 50.0 midpoint.

The upper boundary of the trading range at 83.40 acts as an immediate resistance level for USD/INR. A decisive break above 83.40 will see the next hurdle at the year-to-date (YTD) high of 83.47, en route to the psychological round figure of 84.00.

On the downside, the key contention level will emerge at the 83.00 psychological mark. Further south, the next downside stop to watch is the confluence of the lower limit of the trading range and a low of September 12 at 82.80. A breach of this level will see a drop to a low of August 11 at 82.60.