USD/INR extends the rally despite weaker US Dollar

July 4, 2024 5:38 am

  • The Indian Rupee loses momentum on Thursday despite the softer US Dollar. 
  • The renewed USD demand and higher US bond yields might lift the pair, while weaker US data weigh on the pair. 
  • US markets are closed for Independence Day; the attention will shift to the US June employment data on Friday.

The Indian Rupee (INR) loses ground on Thursday despite the heavy bearish pressure of the US Dollar (USD). The renewed USD demand from local corporations and state-run banks, along with higher US Treasury bond yields, might help limit the pair’s downside.

Nonetheless, the disappointing US ISM Services Purchasing Managers Index (PMI) report for June might weigh on the Greenback and act as a headwind for the pair. Additionally,  the optimism in India’s economic outlook and the continued bull run in Indian equity markets continue to underpin the INR. The US markets will be closed on Thursday due to Independence Day. Investors will shift their attention to the US June employment data on Friday, including Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings.  

Daily Digest Market Movers: Indian Rupee remains weak

  • The final reading of India’s HSBC Services PMI climbed to 60.5 in June from the previous reading of 60.2. This figure came in above the market consensus of 60.4. 
  • The US ISM Services PMI dropped to 48.8 in June from 53.8 in May, missing the market expectation of 52.5 by a wide margin.  
  • The US weekly Initial Jobless Claims rose by 238K in the week ending June 29, according to the US Department of Labour (DoL) on Thursday. This figure came in above the estimate of 235K and higher than the previous weekly gain of 233K.
  • The Minutes of the FOMC monetary policy meeting on June 11-12 released on Wednesday, indicated that the Fed officials emphasized the data-dependent approach and refrained from committing to interest rate cuts until further observation. 
  • Some policymakers noted the importance of patience before considering rate cuts, while several others stated that it’s necessary to hike again if inflation were to rebound, the FOMC Minutes showed. 
  • Chicago Fed President Austan Goolsbee said on Thursday that getting inflation back to 2% will take time and there is still much data to be had on the economy.

Technical analysis: USD/INR might face some consolidation in the near term

The Indian Rupee trades on a weaker note on the day. The bullish trend of the USD/INR pair remains intact on the daily chart as it holds above the key 100-day Exponential Moving Average (EMA). 

In the near term, the USD/INR pair has oscillated within the familiar trading range since March 21. The 14-day Relative Strength Index (RSI) hovers around the 50-midline, suggesting further consolidation cannot be ruled out amid neutral momentum. 

The first upside barrier for the pair will emerge at 83.65, a high of June 26. Further north, the next hurdle is located at the all-time high of 83.75 en route to the 84.00 psychological mark.

In the bearish event, the 100-day EMA at 83.35 acts as an initial support level for USD/INR. A breach of this level will expose the 83.00 round figure, followed by 82.82, a low of January 12.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.

USD   -0.49% -0.77% -0.26% -0.56% 0.33% -0.17% 0.07%
EUR 0.47%   -0.29% 0.21% -0.08% 0.82% 0.31% 0.54%
GBP 0.76% 0.27%   0.49% 0.19% 1.10% 0.59% 0.82%
CAD 0.26% -0.21% -0.50%   -0.31% 0.60% 0.10% 0.33%
AUD 0.56% 0.07% -0.19% 0.28%   0.89% 0.39% 0.62%
JPY -0.33% -0.82% -1.11% -0.59% -0.88%   -0.50% -0.28%
NZD 0.17% -0.30% -0.58% -0.10% -0.41% 0.51%   0.23%
CHF -0.07% -0.55% -0.84% -0.34% -0.65% 0.27% -0.24%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

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