USD/INR posts modest gains ahead of Indian WPI, US Retail Sales data

• Indian Rupee struggles to gain ground on Thursday amid the renewed USD demand, higher US Treasury bond yields.
• The foreign outflows and the upbeat US CPI report for February might drag the INR lower in the near term. 
• India’s Wholesale Price Index (WPI) of Food, Fuel and Inflation, and US Retail Sales will be released on Thursday. 

Indian Rupee (INR) trades on a negative note on Thursday on the stronger US Dollar (USD) and higher US Treasury bond yields. The downside of USD/INR is likely to be limited in the near term amid the foreign outflows and the hotter-than-expected US CPI report for February suggested that the Federal Reserve (Fed) will wait longer to cut interest rates. Additionally, the rebound in oil prices also weighs on the INR as India ranks third in the world for oil consumption. 

Market players await India’s Wholesale Price Index (WPI) of Food, Fuel, and Inflation on Thursday for fresh impetus. The Indian WPI Inflation is estimated to ease to 0.25% YoY in February from 0.27% in January. On the US docket, US Retail Sales will be the highlight on Thursday. Also, the Producer Price Index (PPI), Business Inventories, and usual weekly Initial Jobless Claims will be due later in the day. 

Daily Digest Market Movers: Indian Rupee remains sensitive to global factors

• Morgan Stanley forecast that India’s current expansion resembles the booming 2003–2007 period, when GDP growth averaged 8.6%, as investment has become a major driver of India’s economy. 
• The Indian economy was estimated to grow at 7.6%, according to the central government’s second advance estimate for FY 2024. 
• The Indian Chief Economic Advisor (CEA), V Anantha Nageswaran, has projected that the Indian economy will expand at a faster pace than the government's estimates due to the increase in the activities of the industry and service sectors of the country.
• India's Retail inflation dropped to 5.09% YoY in February from the previous reading of 5.10%, above the consensus of 5.02%, according to the Ministry of Statistics & Programme Implementation.
• The stronger-than-expected US CPI data report might keep the Fed on course to wait at least until the summer before starting to lower interest rates.
• Financial markets have priced in a 75% odds of a 25 basis points (bps) rate cut in June, down from 95% at the beginning of the week, according to the CME FedWatch Tools. 

Technical Analysis: Indian Rupee continues to trade in a longer trading range of 82.60–83.15

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

Technically, USD/INR maintains the bearish outlook unchanged in the near term as the pair is below the 100-day Exponential Moving Average (EMA) on the daily chart. It’s worth noting that the 14-day Relative Strength Index (RSI) lies below the 50.0 midlines, suggesting the path of least resistance is to the downside. 

Any follow-through buying above the confluence of the 100-day EMA and a psychological round mark of 83.00 might convince the bulls to charge again, possibly taking the pair to the upper boundary of the descending trend channel near 83.15. A break above this level will pave the way to the next upside target near a high of January 2 at 83.35, en route to the 84.00 round figure.

On the downside, the key support level for USD/INR is seen near the lower limit of the descending trend channel at 82.60. A breach of the mentioned level will see a drop to a low of August 23 at 82.45, followed by a low of June 1 at 82.25.