USD/INR drifts lower as likely RBI intervention helps limit Indian Rupee's decline

• The Indian Rupee trades on a stronger note in Friday’s Asian session. 
• A deeper Fed rate cut expectation and the potential RBI intervention underpin the INR. 
• Higher crude oil, weakness in its Asian peers and India’s foreign outflows might weigh on the local currency.

The Indian Rupee (INR) gains traction on Friday. Traders increasingly expect the US Federal Reserve (Fed) to cut interest rates in September, which continue undermining the US Dollar (USD). Furthermore, the likely intervention by the Reserve Bank of India (RBI) could prevent the local currency from depreciating. 

Nonetheless, further rebound of crude oil prices might exert some selling pressure on the INR as India is the world's third-biggest oil importer and consumer. The weakness in its Asian peers and India’s foreign outflows might contribute to the Indian Rupee’s downside. In the absence of any top-tier data releases from India and the US on Friday, traders will focus on risk sentiment and the USD dynamic for the time being. 

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

• The RBI’s Monetary Policy Committee (MPC) voted by a 4-2 majority to leave policy rates unchanged and decided to maintain its ‘Withdrawal of Accommodation" stance.
• The Indian central bank retains the real Gross Domestic Product (GDP) growth projection for FY25 at 7.2%, with "risks evenly balanced," and maintains the Consumer Price Index (CPI) inflation forecast for FY25 at 4.5%.
• RBI Governor Shaktikanta Das said that inflation is receding gradually across economies, while medium-term global growth faces significant challenges. However, food price pressures cannot be ignored due to their potential spillover effects. 
• RBI’s Das further stated that it was premature to discuss the recession in the US, but the central bank will monitor all incoming data, both domestic and external. 
• The number of Americans filing new applications for unemployment benefits increased by 233,000 for the week ending August 3 versus 250,000 prior (revised from 249,000). This figure came in below the market consensus of 240K, according to the US Department of Labor (DoL) report on Thursday.
• Investors pare bets the Fed will start cutting interest rates in September with a bigger-than-usual 50 basis points (bps) reduction to nearly 58% odds, down from 70% before the data release, according to the CME FedWatch Tool. 

Technical analysis: USD/INR’s broader outlook remains positive

Indian Rupee trades firmer on the day. According to the daily chart, the bullish outlook for the USD/INR pair remains in play, with the price holding above the key 100-day Exponential Moving Average (EMA) and the uptrend line since June 3. The 14-day Relative Strength Index (RSI) reflects ongoing bullish strength as it stands above the midline near 65.80. 

The first upside target for USD/INR emerges at the 84.00 psychological barrier. Extended gains could pave the way to the all-time high of 84.24. A bullish breakout above this level could see a rally to 84.50. 

On the flip side,  the uptrend line around 83.80 acts as a key contention level for the pair. A breach of the mentioned level could drag the pair lower to the 100-day EMA at 83.51.