USD/INR recovery loses steam, focus on US data, Das’s speech in Davos

• Indian Rupee trades on a positive note as the US Dollar recovery stalls on Thursday.
• RBI’s Das said inflation is moderating, approaching the central bank's 4% target while growth prospects remain robust.
• Investors will monitor the US data and Das’s speech at the annual World Economic Forum (WEF) in Davos.

Indian Rupee (INR) recovers some lost ground on Thursday. The INR fell on Wednesday, driven by equities outflows and the stronger US dollar (USD). That being said, the US Dollar Index (DXY) rose to a one-month high as investors pare bets on aggressive rate cuts following the upbeat US Retail Sales report.

The Reserve Bank of India (RBI) Governor Shaktikanta Das spoke at the annual World Economic Forum (WEF) in Davos, Switzerland. RBI governor Das said inflation in India is moderating and steadily approaching the central bank's 4% target while growth prospects remain robust. He added that core inflation has started steadily coming down, giving confidence that monetary policy is working. The central bank remains fully committed to bringing inflation down to the target of 4%.

Later on Thursday, the US Housing Starts, Building Permits, weekly Initial Claims and Philly Fed Manufacturing Index will be released. Furthermore, the RBI’s Das will discuss insights on key challenges and opportunities and his perspective on monetary policy at the WEF.

Daily Digest Market Movers: Indian Rupee maintains its strength in the face of geopolitical tensions

• Fitch Ratings affirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a stable outlook.
• India’s economy is expected to grow at 7.3% in FY2024, according to the first advance estimate by the National Statistical Office (NSO).
• RBI Governor Shaktikanta Das said India presents a picture of growth and stability amid a challenging global macroeconomic environment.
• RBI’s Das further stated that the Indian economy should record a growth rate of 7% in the next fiscal year, and inflation is likely to ease further.
• US Retail sales rose 0.6% MoM in December from a 0.3% gain in November, beating the estimation of 0.4%, according to the Commerce Department's Census Bureau.
• Retail Sales Control Group grew 0.8% MoM in December from the previous reading of 0.5%, above the market consensus.
• Investors have priced in a 57% odds for a 25 basis points (bps) interest rate cut in March, down from 70% at the beginning of the week, according to the CME Fedwatch tool.
• The Federal Reserve (Fed) Governor Christopher Waller said any rate cuts this year should be done "methodically and carefully.”

Technical Analysis: Indian Rupee clings to the 82.80–83.40 range

Indian Rupee trades strongly on the day. The USD/INR pair has traded within the multi-month trading band between 82.80 and 83.40. The outlook for USD/INR shifts towards bullish sentiment as the pair bounces back above the key 100-period Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) returns above the 50.0 midpoint, suggesting that the buyers could retain control in the near term.

The upper boundary of the trading range at 83.40 acts as an immediate resistance level for USD/INR. Further north, the additional upside filter to watch is a 2023 high of 83.47, en route to the 84.00 psychological round mark. On the other hand, the first support level will emerge at the 83.00 figure. A breach of this mentioned level will see a drop to 82.80 (the lower limit of the trading range, a low of September 12), followed by 82.60 (low of August 11).