USD/INR loses its recovery momentum, Indian, US PMI data eyed

• Indian Rupee trades on a stronger note amid the decline of USD. 
• The pace of Indian GDP growth was the strongest among major economies last quarter.
• India’s S&P Global Manufacturing PMI and the US ISM Manufacturing PMI Index will be the highlights on Friday. 

Indian Rupee (INR) recovers some lost ground on Friday. However, the US Dollar (USD) demand from foreign and state-run banks might cap an uptick of the pair. The pace of GDP growth in the Indian economy was the strongest among major economies last quarter. Prime Minister Narendra Modi's administration has been swiftly attracting multinational corporations to establish factories in the country while spending billions of dollars to improve highways, ports, airports, and trains.

The International Monetary Fund (IMF) forecast India's GDP will grow by 6.5% in 2024. Nonetheless, the rebound in oil prices and elevated domestic inflation might cap the upside of the USD/INR pair.

Investors will focus on India’s S&P Global Manufacturing PMI ahead of the US ISM Manufacturing PMI Index, due on Friday. Also, Fed’s Williams, Logan, Waller, Bostic, Daly, and Kluger are set to speak later in the day. The stronger-than-expected US PMI data might trigger speculation about the delay of interest rate cuts, which will provide some support to the Greenback and USD/INR. 

Daily Digest Market Movers: Indian Rupee remains strong amid the uncertainties

• The Indian economy grew by 8.4% during the October-December quarter of FY24, better than the estimation of 7.3%, according to the Statistics Ministry. 
• India’s GDP Annual growth rate expanded by 7.6% from 7.2%. 
• The US Personal Consumption Expenditure (PCE) Price Index eased from 2.6% to 2.4% YoY, in line with market expectations. 
• The Core PCE, the Fed preferred inflation gauge, rose by 2.8% YoY in January compared to December’s reading of. 2.9%, matching the consensus.
• Atlanta Fed President Raphael Bostic said that the recent inflation data indicates the road back to the central bank’s 2% inflation target will be “bumpy.”, while Chicago Fed President Austan Goolsbee, stated that he expects the first rate cuts later this year, but he cannot specify the timeline. 
• Investors have already fully priced out a Fed rate cut in March but priced in 50% odds of a rate cut in the June meeting.

Technical Analysis: Indian Rupee remains capped in the longer-term range-bound theme

Indian Rupee trades strongly on the day. USD/INR remains confined within a multi-month-old descending trend channel between 82.70 and 83.20 since December 8, 2023. 

In the short term, USD/INR keeps the negative bias unchanged as the pair is still below the 100-day Exponential Moving Average on the daily timeframe. Furthermore, the 14-day Relative Strength Index (RSI) holds in the negative zone below the 50.0 midline, supporting the sellers for the time being. 

The initial support level for the pair is seen at the lower limit of the descending trend channel at 82.70. A breach of this level might convince USD bears to extend the pair’s downtrend near a low of August 23 at 82.45, followed by a low of June 1 at 82.25.

In the case of a bullish trading environment, the critical upside barrier will emerge at the 83.00 mark, portraying the confluence of the 100-day EMA and a psychological round figure. Further north, the next hurdle to watch is a high of January 2 at 83.35, and finally at 84.00.