USDINR Builds Upside Momentum As Key Market Prepares for Key US Data

Summary:
• The USDINR pair was in the red for the last two sessions, but the dollar has a stronger armoury this week as key data are set to come out.

USDINR returned to the upside on Monday, gaining 0.1 percent in the intraday session to trade at 83.41 at the time of writing. The pair had previously recorded consecutive two-day declines as excitement built around India’s Friday debut on the JP Morgan Emerging Markets Index.  However, the rupee ran into headwinds on Monday after the release of India’s Manufacturing data. According to the HSBC India Manufacturing PMI data, India’s June Manufacturing grew by 58.3 percent from May’s 57.5, but fell short of the forecast figure of 58.5 percent.

US PCE figures came out calm on Friday, with both the monthly and yearly Core PCE Price Index coming in at 0.1 percent and 2.6 percent respectively, with each matching the corresponding forecast figure.  US Manufacturing PMI figures are in the pipeline and will likely influence inclination towards the dollar in Monday’s trading session. Furthermore, in a week full of high-impact US economic data releases, many investors will likely position themselves for further strengthening of the dollar.

However, the highlight of the week will be Fed Chair Jerome Powell’s speech, June FOMC meeting minutes and June Non-Farm Payrolls data. The Fed has been non-committal on prospects of interest rate cuts and the new releases will inject new impetus into the USDINR pair. The pair’s outlook will also be influenced by oil price trajectory, as focus turns to the commodity’s much–touted spike in the summer.

Technical analysis

The momentum on USDINR is currently in favour of the bulls, and the upside will likely continue if action stays above 83.37. That could move the pair to encounter the first resistance at 83.41, beyond which extended control by the bulls could push the pair further up to test 83.45. On the other hand, a move below 83.37 will favour the sellers to take control. The downside will likely find the first support at 83.34, and a breach of that mark will invalidate the upside narrative. Also, it could strengthen the downward momentum to test 83.32.