USD/INR recovers its recent losses, eyes on Fed Chair Powell’s testimony

• Indian Rupee loses its recovery momentum despite the softer USD. 
• RBI’s Das said the Indian economy is likely to grow close to 8.0% in FY24, exceeding the estimate of 7.6%.
• Investors will focus on the US weekly Initial Jobless Claims and the second testimony by Fed Chair Powell on Thursday. 

Indian Rupee (INR) edges lower on Thursday despite the decline of the US Dollar Index (DXY). Economists anticipate USD/INR to trade in a narrow band in the next months and to rise modestly in a year as the Reserve Bank of India (RBI) continues to intervene in currency markets. 

On Wednesday, RBI governor Shaktikanta Das said the Indian economy is poised to grow more than the central government's second-advance estimate of 7.6% growth in the current financial year (FY24), and it might be closer to 8.0%. India's robust domestic growth along with stable external macros has been underpinning the strength in INR. Nonetheless, higher US Treasury bond yields and the rebound in oil prices might lift the US Dollar (USD) and cap the downside of the pair. 

Looking ahead, the US weekly Initial Jobless Claims and Trade Balance are due on Thursday, along with the second testimony by Chair Powell and the Fed’s Mester speech. On Friday, attention will shift to the highly-anticipated US Nonfarm Payrolls, which is forecast to see 200K job additions in February from 353K in January.

Daily Digest Market Movers: Indian Rupee remains vulnerable to higher bond yields and a rise in oil prices

• The government raised its growth forecast for the fiscal year 2024 to 7.6% from 7.3%. 
• India's GDP expanded at 8.4% in the final three months of 2023,  the strongest in 18 months, boosted by robust manufacturing and construction activities.
• US ADP private sector employment rose 140K in February from 111K in January, below the market expectation of 150K. 
• January JOLTS job openings dropped to 8.863M versus 9.026M prior, below the consensus of 8.900M.
• The Federal Reserve (Fed) Chair Jerome Powell said on Wednesday that interest rate cuts are likely at some point in 2024, but is not yet ready to say when. 
• Powell noted that the central bank thinks it’s not appropriate to cut the rate until they have confidence that inflation is moving sustainably toward 2%. 

Technical Analysis: Indian Rupee remains capped in a longer band of 82.65-83.15

Indian Rupee trades softer on the day. USD/INR has been traded within a multi-month-old descending trend channel since December 8, 2023 around 82.65-83.15

USD/INR maintains the bearish outlook unchanged as the pair holds below the 100-day Exponential Moving Average (EMA) on the daily chart. It’s worth noting that the 14-day Relative Strength Index (RSI) supports the sellers for the time being as it lies below the 50.0 midline. 

If the pair breaks below the key support level near the lower limit of the descending trend channel at 82.65, then USD/INR may get enough bearish pressure to test lower near a low of August 23 at 82.45 and finally a low of June 1 at 82.25.

A bullish breakout above the confluence of the 100-day EMA and a psychological round figure of 83.00 could attract bulls to the upper boundary of the descending trend channel at 83.15. The additional upside filter to watch is a high of January 2 at 83.35, en route to 84.00.