USD/INR drifts lower on weaker US Dollar

• The Indian Rupee strengthens in Monday’s Asian session. 
• Substantial equity outflows could undermine the INR, but likely RBI intervention might cap its losses. 
• Investors await Fedspeak on Monday for fresh impetus. 

The Indian Rupee (INR) recovers on Monday amid the decline in crude oil prices and softer US Dollar (USD). Persistent outflows from Indian equities might exert some selling pressure on the local currency in the near term. 

However, the interventions by the Reserve Bank of India (RBI) through USD sales could help limit the INR’s losses. Looking ahead, Investors will monitor the Federal Reserve (Fed) Neel Kashkari and Jeffrey Schmid speeches on Monday for fresh impetus.

Daily Digest Market Movers: Indian Rupee rebounds, the potential upside seems limited

• Foreign portfolio investors have sold a net amount of $8.4 billion so far in October, surpassing the previous record outflow of $8.35 billion set in March 2020. 
• Atlanta Fed President Raphael Bostic said on Friday that he is not in a rush on rate cuts and sees the case for rate reduction in the central bank's policy rate to somewhere between 3% and 3.5% by the end of next year, per Reuters.
• According to the CME FedWatch tool, traders have priced in a nearly 92.6% chance of a 25 basis points (bps) Fed rate cut in November.
• The US Building Permits fell by 2.9% to 1.428 million in September from 1.47 million in August, missing estimates of 1.46 million. 
• Housing Starts for September declined by 0.5% to 1.354 millionversus 1.361 million prior, above the consensus of 1.35 million.  

Technical Analysis: USD/INR keeps the positive picture in the longer term

The Indian Rupee edges higher on the day. Technically, the bullish outlook of the USD/INR pair prevails on the daily timeframe, with the price holding above the ascending trend line and the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) stands above the midline near 60.00, suggesting the further upside looks favorable. 

Consistent demand above the all-time high of 84.15 could lead to a bullish upswing that could take USD/INR to 84.50, en route to the 85.00 psychological level. 

On the downside, a decisive break below the rising trend line of 84.00 could revisit the previous support level at 83.71, the 100-day EMA. The next contention level to watch is 83.00, representing the round mark and the low of May 24.