USD/INR loses upside traction on likely RBI intervention

• Indian Rupee recovers its recent losses despite the firmer US Dollar. 
• The robust Indian economic outlook could strengthen the INR amid slowing global economy and multiple challenges. 
• Investors will closely watch the US February PCE data on Friday, despite the markets are closed for Good Friday. 

Indian Rupee (INR) extends its recovery on Wednesday despite renewed US Dollar demand (USD). The rebound of INR from its record low level is supported by the likely intervention from the Reserve Bank of India (RBI) to curb sharp swings in the Indian Rupee. 

Against the backdrop of a slowing global economy and geopolitical headwinds, India's strong economic performance stands out. Foreign portfolio investors turning net buyers in February and Foreign Direct Investment (FDI) inflows are expected to accelerate, according to the monthly economic review report from the Ministry of Finance. The positive Indian economic outlook could boost the INR and limit the USD/INR’s upside. 

The US Gross Domestic Product Annualized (Q4) will be due on Thursday. The growth rate is forecast to remain steady at 3.2%. Investors will closely watch the US February Personal Consumption Expenditures Price Index (PCE) data on Friday. The markets will be closed on Friday for Good Friday. 

Daily Digest Market Movers: Indian Rupee remains strong amid geopolitical challenges

• India’s Current Account Deficit narrowed to $10.5 billion in the quarter that ended December 2023 (Q4) from $11.4 billion in the previous reading, 1.2% of Gross Domestic Product (GDP).
• S&P Global raised India's GDP growth forecast for FY25 to 6.8%, lower than the RBI’s projection of 7%. Additionally, S&P expects RBI to cut rates by 75 bps by the end of this fiscal year.
• The US Conference Board’s Consumer Confidence dropped to 104.7 from a downwardly revised 104.8 in February. 
• The Durable Goods Orders for February rose to 1.4% in February from a 6.9% fall in January, better than estimated. 
• Atlanta Fed President Raphael Bostic suggested that the US central bank should only cut rates once this year as the US economy and inflation slow gradually. 
• Chicago Fed President Austan Goolsbee said that three cuts in 2024 were consistent with his views, but the Fed must see progress in inflation and strike a balance with its dual mandate.

Technical Analysis: Indian Rupee recovers, but upside potential seems limited

Indian Rupee trades firmly on the day. USD/INR maintains the bullish outlook in the longer term since the pair surged above a multi-month-old descending trend channel last week. 

In the short term, USD/INR holds above the key 100-day Exponential Moving Average (EMA) on the daily chart, with the 14-day Relative Strength Index lying above the 50 midline. This suggests that the positive outlook of the pair remains intact and the path of least resistance level is to the upside. 

An all-time high of 83.49 will be the key upside barrier for the pair. Any follow-through buying above this level will pave the way to the 84.00 psychological round mark. On the other hand, the first downside filter to watch is the resistance-turned-support level at 83.20. Further south, the next contention level is located at the confluence of the 100-day EMA and the round figure of the 83.00 mark.