USDINR Stays Range-Bound, But Rupee Strength Bubbles Under

Summary:
• The USDINR pair has stuck in range, with the Indian rupee under pressure from election jitters despite weak dollar fundamentals.

USDINR continued its range-bound trading on Friday, inching up marginally by 0.06 percent to go for 83.54 at press time.  The US dollar has generally had a tumultuous week against major global currencies, with the DXY index below 106.00 on the back of weak US economic data. In the latest instance, the US labour market reported 231,000 Initial Jobs Claims filings, higher than the forecast figure of 212,000.  In the absence of high-impact data scheduled for Friday, the dollar will likely lack propulsion to the upside.

Nonetheless, the rupee finds itself in a vulnerable position, as the Indian stock market continues to experience a decline underlined by election jitters. The period has seen many foreign institutional investors reduce their portfolios in a selloff that has raised the demand for the dollar substantially. The speculative activity during the election period is likely to keep the rupee under pressure in the next few weeks. Nonetheless, the underlying fundamentals are likely to support recovery by the rupee after the elections.

The Indian economy is among the fastest-growing in the world, and is projected to grow by about 6 percent in 2024. In the near term, however, the USDINR pair is likely to be impacted by India Forex Reserves figures set to be released by the Reserve Bank of India later on Friday. This will help traders assess the RBI’s dollar muscle and weigh the likely level of intervention in case the USDINR retests its April all-time highs. In addition, India will release its Industrial Production and Industrial Manufacturing Output figures, which will shed light on the economy’s trajectory.

Technical analysis

The USDINR rate will likely pivot at 83.52. A continuation of price action at this level will favour the buyers to be in control. A continuation of that momentum will likely breach the resistance at 83.55. Also, the momentum could see movement further up to test 83.58. On the other hand, movement below 83.52 will favour the sellers to stay in control, with the support at 83.49 in sight. A continuation of the control could break the support and see the pair move lower to test 83.46.