Indian Rupee declines despite US Dollar underperforms ahead of NFP data

The Indian Rupee (INR) surrenders early gains and turns marginally lower against the US Dollar (USD) on Thursday. The USD/INR pair rises to near 95.30 despite oil prices remaining lower due to progress in talks between the United States (US) and Iran, the Indian central bank likely selling US Dollars in pre-market open, and a slight correction in the US Dollar

In the opening session, the MCX Crude Oil contract expiring on July 20 trades 1% down to near 6,450, the lowest level seen in months.

Currencies of economies, such as India that rely heavily on oil imports to meet their energy needs tend to outperform in a low oil price environment.

A Reuters report has shown that the Indian central bank was likely selling US Dollars in pre-market open to shore up the Indian Rupee.

Qatar says US-Iran talks remain positive

Qatar’s Foreign Ministry spokesperson said that “positive progress” was made on issues related to the Memorandum of Understanding (MoU) between the US and Iran, following a separate meeting of Qatari and Pakistani mediators in Doha, CNN reported on Wednesday. The meeting was expected to be centered on the future of the Strait of Hormuz, unfreezing Iran’s funds, and Tehran’s nuclear ambitions.

The spokesperson also said that both sides confirmed that they would continue talks, which are expected after funeral processions for Iran’s former Supreme Leader, planned for July 4 through July 9.

US Dollar drops ahead of US NFP data

The US Dollar trades lower ahead of the US Nonfarm Payrolls (NFP) data for June, which will be published at 12:30 GMT. Investors will pay close attention to the NFP report to get fresh cues regarding the Fed’s monetary policy outlook.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.25% lower to near 101.10.

The US NFP report is expected to show that the economy created 110K fresh jobs, lower than 172K in May. The Unemployment Rate is seen remaining steady at 4.3%.

Currently, the CME FedWatch tool shows that traders see an almost 85% chance that the Federal Reserve (Fed) will deliver at least one interest rate hike. Such a scenario bodes well for interest-bearing assets and the US Dollar.

FIIs remain net sellers on first trading day of July

Foreign Institutional Investors turned out to be net sellers on the first day of July, offloading their stake worth Rs. 1,140.50 crore. Overseas investors continue to remain net sellers despite oil prices having returned to pre-Middle East war levels.

Technical Analysis: USD/INR stays above 20-day EMA

USD/INR trades higher at around 95.30 at press time, holding a bullish near-term bias as the pair has returned above the 20-day exponential moving average (EMA), which is at 94.84. The pair is also trading the downward-sloping border of the Descending Triangle chart pattern, indicating hopes of a volatility contraction breakout.

The Relative Strength Index (RSI) around 55 indicates neutral-to-positive momentum rather than exhaustion, hinting that dips could still attract buying interest as long as the price stays above the short-term EMA.

On the downside, immediate support is seen at the 20-day EMA at 94.85 and then the structural trend-line base near 93.99. On the topside, the primary hurdle is the July 1 high at 95.52, followed by the June 4 high at 96.30.

(The technical analysis of this story was written with the help of an AI tool.)