USD/INR weakens ahead of US Retail Sales data

• Indian Rupee holds positive ground on the softer US Dollar on Tuesday. 
• The upside of the INR might be limited amid the Fed’s hawkish tone and higher crude oil prices. 
• Investors await the US Retail Sales data for fresh impetus, which is due on Tuesday. 

The Indian Rupee (INR) gains ground amid the weaker Greenback on Tuesday. The upside of the local currency might be limited as the cautious stance from US Federal Reserve (Fed) officials is likely to influence the US Dollar (USD) for the time being. Additionally, the rebound of crude oil prices might weigh on the INR. It’s worth noting that India is the third largest consumer of oil behind the US and China. 

Nonetheless, the potential foreign exchange intervention by the Reserve Bank of India (RBI) might support the Indian Rupee and cap the upside for the pair. Looking ahead, the US Retail Sales is due on Tuesday, which is estimated to improve 0.2% MoM in May. The strong consumer spending might further boost the Greenback against the INR. Apart from this, the Fed Lisa Cook, Thomas Barkin, Adriana Kugler, Lorie Logan, Alberto Musalem, and Austan Goolsbee are scheduled to speak later on Tuesday.

Daily Digest Market Movers: Indian Rupee edges higher despite the Fed’s hawkish stance

• India will continue to be the fastest-growing economy in Asia-Pacific in 2024, sustaining last year's domestically driven momentum, according to the rating agency Moody’s. 
• Philadelphia Fed President Patrick Harker said on Monday if the US economy performed as he expected, the Fed would be able to cut its benchmark interest rate once this year, per Reuters. 
• Cleveland Fed Bank President Loretta Mester and Chicago Fed Bank President Austan Goolsebee emphasized the need for more confidence and said they would wait for the data.
• The US NY Empire State Manufacturing Index recovered to -6.0 in June from the previous reading of -15.6. in May, above the consensus of the forecast of -9.0. The index has remained in contraction territory since November of last year.
• Investors see a nearly 62% chance rate cut from the US Fed on September 18, according to the CME’s FedWatch Tool. 

Technical analysis: USD/INR displays bullish vibe in the longer term

The Indian Rupee trades weaker on the day. The bullish outlook of the USD/INR pair remains intact as the pair has been making higher highs and higher lows since the start of June, and holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which stands in bullish territory around 55.50.

In the bullish case, the immediate resistance level for the pair will emerge at 83.60 (high of June 11). Any follow-through buying above this level will pave the way to 83.72 (high of April 17) en route to the 84.00 psychological mark.  

On the flip side, the key support level for USD/INR is located at 83.35 (100-day EMA). A breach of this level could expose 83.00 (round figure), followed by 82.78 (low of January 15).