USD/INR loses traction ahead of Indian/US PMI data

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• Indian Rupee rebounds on Monday on the softer USD. 
• The success of Narendra Modi's (BJP) third-term election might boost the INR. 
• The final reading on Indian and US Manufacturing PMI for May will be in the spotlight on Monday. 

Indian Rupee (INR) recovers on Monday amid the weaker US dollar (USD). On Friday, the INR closed the week with its worst weekly performance in over two months, pressured by month-end USD demand from importers. However, the decline of the INR might be limited as the Reserve Bank of India (RBI) is likely to intervene in the local currency from depreciation. 

Market players await India's general election outcome, with vote counting on June 4. Analysts expect the Indian Rupee to rally this week as exit polls revealed Prime Minister Narendra Modi's Bharatiya Janata Party would win a third term. 

The final reading of India’s Manufacturing Purchasing Managers Index (PMI) for May is due on Monday, which is expected to remain unchanged from the first estimate of 58.4. 

On the US docket, the ISM Manufacturing PMI will be released. The stronger-than-expected reading might dampen the expectation of the Federal Reserve (Fed) rate cut this year and boost the Greenback. 

Daily Digest Market Movers: Indian Rupee gains ground ahead of India's general election result

• Most exit polls projected the governing NDA would win a two-thirds majority in the 543-member lower house of parliament, where 272 is required for a simple majority.
• The 10-year Indian government bond yield closed Friday at 6.9809%, marking the sixth straight weekly decline and having its biggest monthly loss in four years.
• The US Personal Consumption Expenditures (PCE) Price Index came in as expected, advancing 0.3% on a monthly basis in April and rising 2.7% on a yearly basis. 
• The Core PCE, excluding the volatile food and energy, rose 0.2% MoM in April, compared to a 0.3% gain in March. On an annual basis, the core PCE price index climbed 2.8% for the third consecutive month.
• Personal Income rose 0.3% on a monthly basis in April, while Personal Spending grew by 0.2%.
• The US ISM Manufacturing PMI is expected to improve to 49.8 in May from 49.2 in April. 

Technical analysis: USD/INR’s bullish outlook prevails

The Indian Rupee trades stronger on the day. The USD/INR pair keeps the bullish vibe above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which stands around 55.0, supporting the buyers for the time being. 

A decisive break above a descending trend channel that has been established since mid-April at 83.40 will see a rally to 83.54 (high of May 13), followed by 83.72 (high of April 17), and finally at 84.00 (psychological mark).

On the flip side, the 100-day EMA around 83.21 acts as an initial support level for USD/INR. The key contention level to watch is the 83.00 round figure, A breach of the mentioned level could expose 82.78 (low of January 15).