USD/INR weakens ahead of Indian/US PMI data

• The Indian Rupee edges higher on the modest decline of the US Dollar on Friday. 
• Foreign inflows into Indian bonds could lift the INR, while higher crude oil prices might weigh on it. 
• The first reading of June’s PMI data from both India and the US is due on Friday. 

The Indian Rupee (INR) gains ground on Friday due to the modest decline of the US Dollar (USD). The significant inflows into the Indian bond market ahead of India’s inclusion in the JPMorgan Emerging Market bond index at the end of this month are likely to boost the local currency in the near term. 

On the other hand, the renewed Greenback demand from local importers, likely capital outflows, and the weakening in the Chinese Yuan might exert some selling pressure on the INR. Additionally, the rally in crude oil prices might drag the INR lower as India is the third-largest consumer of crude oil in the world. Investors will keep an eye on the first reading of the Indian HSBC Purchasing Managers Index (PMI) on Friday. Also, the US S&P Global PMI reports for June will be released. 

Daily Digest Market Movers: Indian Rupee edges higher amid foreign inflows into Indian markets

• Foreign investors have sold a net of US$2.6 billion of local equities so far this calendar year, while US Dollar inflows into the debt markets have been strong at US$7.5 billion ahead of India’s inclusion in the JPMorgan Emerging Market bond index.
• Foreign inflows into Indian bonds could reach a decade-high of $2 billion around June 28, when they will be included in a widely-tracked JPMorgan index, although the RBI will lap up most of the USD to avoid the volatility in the INR, bankers said. 
• The preliminary India’s HSBC Services PMI is expected to drop to 60.0 in June from 60.2 in May. 
• US citizens who applied for unemployment insurance benefits increased by 238K in the week ending June 15. This figure was lower than the previous weekly gain of 243K and below the market consensus of 235K. 
• US Building Permits declined by 3.6% MoM in May from 1.44 million to 1.386 million, while Housing Starts for the same period dropped by 5.5% from 1.352 million to 1.277 million.
• Fed Bank of Richmond President Tom Barkin said on Thursday that the central bank is well-positioned with the necessary firepower for the job, but will learn a lot more over the next several months.  

Technical analysis: USD/INR holds bullish bias in the longer term

The Indian Rupee trades stronger on the day. The USD/INR pair keeps the constructive vibe unchanged as it holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The bullish momentum is also supported by the 14-day Relative Strength Index (RSI), which remains above the 50-midline, supporting the buyers for the time being. 

Any follow-through buying will attract some buyers to the all-time high of 83.75. The next barrier will emerge at the 84.00 psychological level. 

On the downside, the initial support level for the pair is seen near 83.60, a low of June 20. The potential contention level to watch is the 83.30-83.35 region, the resistance-turned-support level, and the 100-day EMA. Extended losses will expose the 83.00 round figure.