USD/INR gathers strength as US Dollar demand weighs on Indian Rupee

• Indian Rupee trades in negative territory in Monday’s Asian session.
• The USD month-end flows and potential RBI intervention underpin the pair. 
• Investors will monitor the Fed's Bowman speech on Monday.

The Indian Rupee (INR) weakens on Monday, pressured by month-end US Dollar (USD) demand from importers and likely interventions by the Reserve Bank of India (RBI). However, strong inflows and lower crude oil prices might help limit the INR’s losses. 

Investors will focus on Fed Governor Michelle Bowman's speech on Monday, which might offer some insight and outlook on the US interest rate. Also, the Chicago Purchasing Managers' Index (PMI) and Dallas Fed Manufacturing Business Index will be released. On the Indian docket, the August Federal Fiscal Deficit is due later in the day

Daily Digest Market Movers: Indian Rupee softens as USD demand weighs heavily

• The Indian rupee has remained largely stable against the USD in the current calendar year (CY 2024), depreciating by just 0.59% so far.
• Chief Economic Advisor (CEA) V Anantha Nageswaran said on Friday that the Indian economy is estimated to grow at a rate of 6.5-7% in the current financial year on a steady-state basis.
• The Personal Consumption Expenditures (PCE) Price Index rose by 2.2% year-over-year in August, compared to 2.5% in July, the US Bureau of Economic Analysis (BEA) showed on Friday. This figure was softer than the estimates of 2.3%. 
• The core PCE, which excludes the more volatile food and energy prices, climbed 2.7% YoY in August, compared to the previous reading of 2.6%,  in line with the consensus of 2.7%. On a monthly basis, the core PCE Price Index increased by 0.1% in the same report period versus 0.2% prior. 
• University of Michigan's Consumer Sentiment Index rose to 70.1 in September from 66.0 in August, better than the estimates of 69.3. 
• Interest rate futures contracts have priced in a nearly 54% chance of a half-point cut in November, versus a 46% possibility of a quarter-point cut, according to the CME FedWatch Tool.

Technical Analysis: USD/INR tests rectangle pullback, success could see upward resumption

The Indian Rupee trades softer on the day. According to the daily chart, the constructive bias of the USD/INR pair persists as the price holds above the key 100-day Exponential Moving Average (EMA). However, further downside looks favorable as the RSI is located below the midline near 46.60. 

The support-turned-resistance level at 83.75 acts as an immediate resistance level for USD/INR. Further north, the next upside barrier emerges at the 84.00 psychological mark. 

The potential support level is located at the 100-period EMA at 83.62. Any follow-through selling below this level will see a drop to 83.00, representing the psychological level and the low of May 24.