USDINR Down As Weak US Data Weighs Down the Dollar

USDINR declined on Wednesday, trading at 87.03 at the time of writing after declining by 0.1% on the daily chart. The pressure on the pair is driven by weak US data and continued interventions by the Reserve Bank of India (RBI). In addition, the escalation of tariff war between the United States and its trade partners has created a FUD sentiment in the equities markets, with its impact permeating to the forex markets. 

The Indian equities markets are under pressure from an underperforming economy, which has catalysed an outflow of foreign institutional investments.  That has thrown the RBI into action, with the central bank selling the dollar to keep the rupee afloat. India’s Purchasing Managers Index (PMI) contracted in February, printing out at 57.1 from January’s 57.5, adding credence to underlying economic pressures.

India’s Prime Minister Narendra Modi met US President Donald Trump in mid-February, with the visit centering on trade relations between the two nations. Trump stirred up the markets this week when he reiterated that 25% tariffs against Canada and Mexico will kick off in March.

Also, Trump recently announced an equivalent percentage of tariffs against pharmaceuticals, which could affect India’s dollar inflows. India exported $7.5 billion worth of pharmaceuticals in 2023, signifying the extent to which the prolonged tariff paralysis could put pressure on the country’s economy. US GDP figures and Personal Consumption Expenditure (PCE) data will be out on Thursday and Friday respectively, and could add fresh volatility into the USDINR pair.

USDINR Prediction

USDINR pivots at 87.09 and resistance at that level signals control by the sellers. The pair will likely find the first support at 86.97, but a stronger momentum could break below that level to go toward the second support at 86.75.

Conversely, the momentum will shift to the upside if the price goes above 87.09. If that happens, USDINR could head higher to encounter the first resistance at 87.20. The downside narrative will be invalid if the price breaks above that level, with the momentum potentially spilling over to test the second resistance at 87.33.