USD/INR halts its rally ahead of US PCE data

• Indian Rupee trades on a positive note on the weaker USD on Friday. 
• The uptick in INR is bolstered by interbank USD sales and easing Middle East tensions.
• The final reading of the US March Personal Consumption Expenditures Price Index (PCE) will be the highlight on Friday. 

Indian Rupee (INR) extends the rally on Friday, bolstered by interbank US Dollar (USD) sales. The softer USD against key rivals overseas and easing geopolitical tensions in the Middle East also supported the local currency. However, the recovery in crude oil prices and foreign capital outflows might weigh on the INR. Additionally, a hawkish repricing of US Federal Reserve (Fed) rate cut expectations amid elevated inflation will continue to boost the USD and cap the pair’s downside. 

Market players will keep an eye on the final reading of the US March Personal Consumption Expenditures Price Index (PCE), which might offer some hints about the inflation trajectory in the US and point to the Federal Reserve's (Fed) next move. Apart from this, India’s general election, which started on 19 April and will run until 1 June, will be closely watched. 

Daily Digest Market Movers: Indian Rupee remains firm amid global challenges

• The Indian Rupee was the least volatile major currency among its emerging market peers and a few advanced economies in the financial year 2023–24, according to the Monthly Economic Review report of the Department of Economic Affairs under the Ministry of Finance.
• The report added that India’s foreign exchange reserves reached an all-time high in March 2024, sufficient to cover 11 months of projected imports and more than 100% of total external debt. 
• The first estimate of US Gross Domestic Product (GDP) grew by 1.6% on an annualized basis in the first quarter (Q1) of 2024, compared to a 3.4% growth in Q4 2023, below the market consensus of 2.5%.  
• The US Personal Consumption Expenditures Prices (PCE) rose at an annualized rate of 3.4% in Q1, nearly double the 1.8% pace recorded in Q4 2023.
• HSBC analysts expect the Fed to leave its policy rate unchanged in May and said that economic growth and core inflation data in the coming months will likely impact policy in June and beyond. 

Technical analysis: USD/INR maintains a constructive outlook in the longer term

The Indian Rupee trades stronger on the day. The positive outlook of USD/INR remains unchanged on the daily chart as the pair is above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) holds in bearish territory around 48.00, suggesting the potential decline cannot be ruled out. 

The first downside target of USD/INR will emerge near the confluence of the 100-day EMA and a low of April 10 in the 83.10–83.15 region. A decisive break below this level will see a drop to a low of January 15 at 82.78, followed by a low of March 16 at 82.65. On the upside, the immediate resistance level is seen near a high of April 15 at 83.50. Further north, the next hurdle is located near an all-time high of 83.72, en route to the 84.00 psychological level.