USD/INR strengthens amid Iran airport attacks and oil prices rise

• Indian Rupee weakens on Friday due to geopolitical tension risks, renewed USD demand. 
• The fear of a wider conflict between Israel and Iran exerts some selling pressure on the INR. 
• Investors await the RBI Monetary Policy Committee (MPC) Meeting Minutes, which are due on Friday.

Indian Rupee (INR) trades on a weaker note on Friday amid geopolitical fears and foreign fund outflows. The escalating tension between Israel and Iran heightens concerns of a wider conflict in the Middle East, triggering the fear of oil supply disruption. Higher oil prices hurt the INR, as India is the third-largest consumer and importer of crude oil. Furthermore, the higher demand for the US dollar (USD) on safe-haven appeal might lift the pair. 

However, the USD/INR’s potential upside is limited as the Reserve Bank of India (RBI) is likely to intervene in the foreign exchange (FX) market to prevent the volatility of local currency. Investors will monitor the RBI Monetary Policy Committee (MPC) Meeting Minutes on Friday. Also, Chicago Fed Austan Goolsbee is set to speak. 

Daily Digest Market Movers: The Indian Rupee remains vulnerable amid Middle East tensions

• Trimming trade deficit, expectations of USD inflows in debt markets, and strong growth momentum have been supportive for the INR,” said Dilip Parmar, Research Analyst, HDFC Securities.
• Israeli missiles attacked a site target in Iran, ABC News said late Thursday, citing a US source, while Iranian state media claimed an explosion in the country's center days after Iran carried out a retaliatory drone strike on Israel.
• The International Monetary Fund (IMF) raised India’s GDP growth forecast for 2024–25 to 6.8% in its update to the World Economic Outlook (WEO). 
• The US Initial Jobless Claims for the week ending April 13 increased below market consensus, rising by 212,000 from the previous weekly gain of 212K (revised from 211K). 
• The Philadelphia Fed Manufacturing Index jumped to 15.5 in April from 3.2 in March, beating the estimation of 1.5. The US Existing Home Sales dropped by 4.3% MoM to 4.19 million from 4.38 million, worse than the anticipated 4.2 million.
• Atlanta Fed President Raphael Bostic said US inflation is expected to return to the 2% target at a slower pace than many had anticipated, adding that he’s comfortable being patient and that rate cuts are likely by year-end. 
• New York Fed President John Williams said that he doesn't feel an urgency to cut rates and that monetary policy is in a good place.  

Technical analysis: USD/INR maintains a bullish outlook 

The Indian Rupee trades weaker on the day. USD/INR keeps the bullish stance unchanged as the pair is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is confirmed by the 14-day Relative Strength Index (RSI), which hovers around 65.00, suggesting that support zones are more likely to hold than to break.

The first upside barrier of the pair will emerge near an all-time high of 83.72. A decisive break above this level will pave the way to the 84.00 psychological round figure. On the other hand, a low of April 18 at 83.50 acts as an initial support level, followed by a low of April 12 at 83.30. A downside break below the 100-day EMA at 83.12 might spark a sharp decline.