USD/INR struggles to gain ground ahead of Indian Services PMI data

• The Indian Rupee posts modest gains in Wednesday’s Asian session.
• India’s foreign portfolio inflows and lower crude oil prices support the INR. 
• Market players await India’s HSBC Services PMI on Wednesday ahead of the FOMC Minutes.

The Indian Rupee (INR) trades with mild gains on Wednesday amid the weaker US Dollar (USD). Foreign portfolio inflows into the equity markets have returned following the post-election outflows, which might boost the Indian Rupee. Additionally, the decline in crude oil prices helps limit the INR’s losses. 

Market players are focusing on the final reading of India’s HSBC Services PMI on Wednesday, which is expected to improve to 60.4 in June, up from 60.2 in the previous reading. On the US docket, ADP Employment Change, ISM Services PMI for June, and the FOMC Minutes will be released later on Wednesday. The cautious stance from the Federal Reserve (Fed) Chair might support the USD. Furthermore, any evidence of further improvement in the US economy might lift the Greenback and create a tailwind for USD/INR.

Daily Digest Market Movers: Indian Rupee remains firm amid optimistic Indian economy outlook

• Nomura analysts expect the Indian rupee will rally by 2% by August. "India's post-election calm, portfolio inflows, economic sweet spot and the RBI (Reserve Bank of India) containing FX volatility are supportive factors," said Nomura analysts.
• India's foreign exchange reserves rose by $816 million to $653.711 billion last week, the Reserve Bank of India (RBI) revealed on Friday.
• Fed Chair Jerome Powell stated on Tuesday that US inflation is cooling again after higher readings earlier this year, but he wants to see more evidence before being confident enough to start cutting interest rates.  
• Chicago Fed President Austan Goolsbee said that he sees some "warning signs" of economic weakness, and added that the Fed's goal is to bring inflation down without pressuring the labour market. 
• US JOLTS Job Openings climbed to 8.14 million in May, followed by the 7.91 million (revised from 8.05 million) openings reported in April. This figure exceeded the forecasts of 7.91 million, US Bureau of Labor Statistics reported on Tuesday.
• Traders are now pricing in a nearly 63% chance for a 25 basis points (bps) rate cut from the Fed in September, up from 59.5% on Monday, according to the CME FedWatch tool.

Technical analysis: USD/INR might stick within the consolidative range in the near term

The Indian Rupee trades stronger on the day. The USD/INR pair remains capped within the familiar trading range on the daily timeframe. The pair maintains the bullish outlook unchanged in the longer term. However, in the near term, further consolidation looks favorable as the 14-day Relative Strength Index (RSI) hovers around the 50-midline, indicating neutral momentum. 

Extended gains above 83.65, a high of June 26, would set up the pair for a potential move to the all-time high of 83.75. An upside breakout might attract some buyers to the 84.00 psychological level. 

On the flip side, the initial support level for USD/INR will emerge at 83.35, the 100-day EMA. A decisive break below this level will pave the way to the 83.00 round figure, en route to 82.82, a low of January 12.