USD/INR loses traction ahead of US PMI data

• Indian Rupee holds positive ground on Tuesday amid equity inflows, USD sales, and lower oil prices. 
• India’s HSBC Manufacturing PMI arrived at 59.1 in April vs. 59.1 prior; Services PMI figure improved in the same period. 
• A hawkish repricing of US Fed rate-cut expectations might cap the pair’s downside. 
• Market players await the US preliminary S&P Global PMI for April, due later on Tuesday.

The Indian Rupee (INR) gains ground on Tuesday, backed by likely equity inflows and US Dollar (USD) sales from state-run banks. The latest data from the Indian docket revealed that the nation’s HSBC Manufacturing Purchasing Managers Index (PMI) came in at 59.1 in April, compared to 59.1 in March. The Services PMI figure rose to 61.7 from the previous reading of 61.2. The INR remains mildly bid following the mixed PMI data. Additionally, the recovery of the INR is bolstered by the decline in oil prices as the fear of a wider Middle East war fades.  

Nonetheless, the upside of local currency is likely to be a temporary relief as hawkish repricing of US Federal Reserve (Fed) rate cut expectations will continue to lift the USD, Arnob Biswas, head of foreign exchange research at SMC Global Securities, said.

Investors will monitor the US S&P Global PMI for April later in the day. On Friday, the final reading of the US March Personal Consumption Expenditures Price Index (PCE) will take center stage. Stronger-than-expected US economic data might trigger speculation that the Fed will delay the rate cut cycle and boost the Greenback. 

Daily Digest Market Movers: The Indian Rupee rebounds amid lower crude oil prices

• Brent crude oil prices dropped 0.7% to $86.70 a barrel on Monday. Indian stocks climbed, with the main indices, BSE Sensex and Nifty 50, rising by almost 0.8% and 0.9%, respectively.
• Continuing the economic growth momentum of 7% in 2024–25 and beyond is possible due to favorable monsoons, increased agricultural production, and enhanced global commerce, said RBI Monetary Policy Committee (MPC) member Shashanka Bhide on Monday.
• The International Monetary Fund (IMF) raised India’s growth projection to 6.8% for 2024 from its January forecast of 6.5%, while the Asian Development Bank (ADB) also raised India’s GDP growth forecast for the current fiscal year to 7% from 6.7% earlier.
• Strong growth is allowing India’s policymakers to maintain interest rates higher for longer to ensure inflation is lowered in a durable manner, according to the minutes of the RBI monetary policy meeting.
• The Chicago Fed National Activity Index improved to 0.15 in March from 0.09 in the previous reading, according to the Fed Bank of Chicago. 

Technical analysis: USD/INR remains bullish in the longer term

The Indian Rupee trades weaker on the day. USD/INR keeps the bullish stance unchanged on the daily timeframe as the pair holds above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) hovers around the 50.00 midline, suggesting that further consolidation cannot be ruled out before positioning for any near-term USD/INR depreciation.

The first upside barrier for the pair will emerge near a high of April 15 at 83.50. The next hurdle is located at an all-time high of 83.72. Stronger bullish momentum might even take the pair for an upside break to the 84.00 psychological level. On the other hand, the initial support level is seen around a low of April 11 at 83.30. A fresh round of sell-off will pave the way to the 100-day EMA at 83.12, followed by a low of January 15 at 82.78.