USD/INR loses its recovery momentum, eyes on Indian WPI inflation, US Retail Sales

• Indian Rupee attracts some buyers, supported by the upbeat Indian CPI inflation data and foreign inflows. 
• Risk-averse sentiment and the possible intervention from the Indian central bank might limit the upside of INR. 
• Market players await the Indian WPI inflation and US Retail Sales for February, due on Thursday. 

Indian Rupee (INR) trades on a positive note on Wednesday. The upbeat Indian Retail Inflation data for February provides some support to the local currency and drags the USD/INR pair lower. The recovery of INR is also bolstered by persistent foreign inflows in domestic equity markets. However, the renewed US Dollar (USD) demand from importers, risk-averse sentiment, and the potential intervention from the Reserve Bank of India (RBI) might cap the upside of the Indian Rupee. 

Looking ahead, investors will monitor India’s Wholesale Price Index (WPI) of Food, Fuel, and Inflation on Thursday. On the US docket, US Retail Sales will be in the spotlight later on Thursday. The Retail Sales figure is estimated to improve to 0.8% MoM in February from a 0.8% drop in January. 

Daily Digest Market Movers: Indian Rupee remains stronger amid multiple headwinds

• India's Retail inflation eased to 5.09% YoY in February from 5.10% in the previous month, better than the market expectation of 5.02%, according to the Ministry of Statistics & Programme Implementation.
• The Indian food inflation for February came in at 8.66% versus 8.30% prior. Meanwhile, the rural inflation rate remained steady at 5.34%, while the urban inflation rate declined to 4.78% from 4.92% in January.
• India's Industrial Production dropped to 3.8% YoY in January from the previous reading of 4.2%, stronger than estimated. 
• The US headline Consumer Price Index (CPI) came in line with expectations, rising 0.4% MoM in February. The annual CPI figure was above the market consensus, increasing 3.2% YoY in February. 
• The Core CPI, excluding volatile food and energy prices, climbed 0.4% MoM and 3.8% YoY, above the market consensus. 
• The upbeat inflation data might convince the Fed to focus on more data and allow policymakers to avoid having to rush to cut rates.

Technical Analysis: Indian Rupee remains capped within longer term trading range

Indian Rupee trades strongly on the day. USD/INR has stayed within a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023. 

The bearish outlook of USD/INR remains intact in the near term as the pair is below the 100-day Exponential Moving Average (EMA) on the daily timeframe. Furthermore, the downward momentum is supported by the 14-day Relative Strength Index (RSI), which lies below the 50.0 midlines, indicating the downtrend is more likely to resume than to reverse. 

The lower limit of the descending trend channel at 82.60 acts as a potential support level for the pair. A breach of this level could sustain a bearish drop to a low of August 23 at 82.45, followed by a low of June 1 at 82.25.

On the upside, a decisive break above the confluence of the 100-day EMA and a psychological round mark of 83.00 could make its way back up to the upper boundary of the descending trend channel at 83.15. A bullish breakout above 83.15 will expose a high of January 2 at 83.35, en route to the 84.00 round figure.