USD/INR flat-lines ahead of Indian Services PMI

• Indian Rupee remains flat on Monday despite the modest rebound of the USD. 
• India’s upbeat GDP growth in the October-December quarter boosts the INR and caps the pair’s upside. 
• Market players will focus on the Indian February S&P Global Services PMI, due on Tuesday.

Indian Rupee (INR) trades on a flat note on Monday. The upside of INR is bolstered by data showing India’s GDP growth in the October-December quarter considerably above forecasts. India's economy grew at its fastest pace in one-and-a-half years in the December quarter, with the economy expanding by 8.4%, against the 6.6% anticipated.

On the other hand, the renewed US Dollar (USD) demand and the prospect of delayed rate cut expectations from the Federal Reserve (Fed) might weigh on the Indian Rupee in the near term. Nonetheless, analysts said that the pair is likely to remain in a narrow band this year as the Reserve Bank of India (RBI) monitors foreign exchange markets closely and intervenes when necessary to prevent excessive volatility in the exchange rate. 

The Indian S&P Global Services PMI for February will be due on Tuesday. Investors will closely watch Fed's Chair Jerome Powell testify on Wednesday, which might offer some hints about a broad overview of the economy and monetary policy. On Friday, the US employment data will be released, including the Nonfarm Payrolls (NFP), Average Hourly Earnings, and Unemployment Rate. 

Daily Digest Market Movers: Indian Rupee stands flat amid the positive economic outlook

• India's foreign exchange reserves increased by $2.975 billion to $619.072 billion for the week ending on February 23, according to the Reserve Bank of India (RBI).
• The US ISM Manufacturing PMI came in weaker-than-expected, dropping to 47.8 in February from 49.1 in January.  
• The University of Michigan Consumer Sentiment Index eased to 76.9 from 79.6, below the market consensus. 
• Boston Fed President Susan Collins and New York’s John Williams stated that the first rate cut will likely be appropriate later this year, while Atlanta’s Raphael Bostic said the first cut in rates would be appropriate probably at the end of this year at the earliest.
• The financial markets have priced in the 70% odds that the Federal Reserve (Fed) will start cutting interest rates at the June meeting.

Technical Analysis: Indian Rupee is likely to extend range bound of 82.70-83.20

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

In the near term, USD/INR maintains the bearish outlook unchanged as the pair is still below the 100-day Exponential Moving Average on the daily timeframe. The bearish momentum is supported by the 14-day Relative Strength Index (RSI), which holds in the negative zone below the 50.0 midline. 

Further selling vibes could drag the pair lower to 82.70, representing the lower limit of the descending trend channel. Further south, the next contention is seen near a low of August 23 at 82.45, followed by a low of June 1 at 82.25.

The potential upside barrier will emerge near the confluence of the 100-day EMA and a psychological round figure at the 83.00 mark. Sustained bullish momentum past this point will pave the way to a high of January 2 at 83.35, en route to 84.00.