USDINR inched up in the intraday session on Friday, gaining 0.02 percent to trade at 83.45. The Indian rupee has been strengthened following the Reserve Bank of India’s decision to retain interest rates at 6.5 percent, in a largely expected move. Nonetheless, the US dollar is on course to end the second consecutive week of wins against the rupee, powered by May Non-Farm Payrolls data.
The month-long Indian elections came to an end on June 1, but that has not won over investors amidst a perceived decline in the popularity of Prime Minister Narendra Modi’s BJP party. Modi’s win did not give him the majority seats needed, with the BJP’s 240 parliamentary seats falling short of the 272 seats needed to form a majority. That means that the BJP will have to depend on other parties in a coalition arrangement that could destabilise some of Modi’s policies.
Nonetheless, India’s economy remains in the growth trajectory, and the end of the election cycle will calm investors’ nerves. That said, the Indian rupee faced headwinds at the beginning of the week when the HSBC Indian Manufacturing PMI figure for May came in at 57.5 percent versus a forecast figure of 58.4. The slowdown in growth, was perhaps linked to the elections, and it remains to be seen whether the figure will rise in June.
Meanwhile, the US dollar had mixed fortunes this week, underlined by better-than-expected car sales figures and higher-than-expected Initial Jobless Claims filings. The Nonfarm Payrolls Figures will determine the greenback’s strength heading into the weekend, and potentially well into next week when the CPI data will be released. The NFP figures released on Friday came in higher than expected, registering 272,000 jobs versus the forecast estimate of 182,000. This is a vote of confidence in the US economy after recent soft data, and will provide tailwinds for the dollar in the near term.
Technical analysis
The momentum on USDINR shows that the buyers are in control, and calls for further upside. The pair will likely pivot at 82.34, and the upward action will likely encounter the first resistance at 83.47. Furthermore, continued control by the buyers at that point could extend gains to test 83.54. On the other hand, a break below 82.34 will favour the sellers to take control, with the first support likely to be at 82.26. However, a break past that mark will strengthen the downward momentum and invalidate the upside view. Furthermore, it could result in the USDINR exchange rate going lower to test 83.16.
