USD/INR slumps ahead of US NFP data

The Indian Rupee (INR) surges against the US Dollar (USD) during the European trading session on Thursday. The USD/INR pair posts a fresh monthly low near 85.40 as the US Dollar drops ahead of the United States (US) Nonfarm Payrolls (NFP) data for June, which will be published at 12:30 GMT.

The US NFP report is expected to show that the economy added 110K fresh workers, fewer than 139K in May. The Unemployment Rate is estimated to have accelerated to 4.3% from the prior reading of 4.2%.

Financial market participants will also pay close attention to the Average Hourly Earnings data, a key indicator of wage growth, which is expected to have grown steadily by 3.9% on year. Month-on-month wage growth measure is estimated to have risen at a slower pace of 0.3%, compared to a 0.4% growth seen in May.

Investors will closely monitor the US NFP data as a few Federal Reserve (Fed) officials have argued in favor of interest rate cuts as early as the July policy meeting, citing concerns over labor market strength.

"The Fed should not wait for the job market to crash in order to cut rates," Fed Governor Christopher Waller said in an interview in the last week of June.

Meanwhile, the ADP Employment Change data on Wednesday has shown cracks emerging in the labor market. The agency reported a decline in the labor force in the private sector for the first time since the pandemic era. Businesses laid off 33K employees in June, while they were expected to hire 95K fresh workers. Additionally, the May reading was also revised lower to 29K from 37K.

“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” Nela Richardson, chief economist at ADP, said.

Daily digest market movers: Indian Rupee outperforms US Dollar

• The Indian Rupee gains against its major peers on hopes that both India and the US will secure a deal before the tariff deadline. A sreport from the NDTV showed during Asian trading hours that India and the US can announced a trade agreement within "48 hours".
• The report also highlighted that both the nations aim to lowering overall duty barriers. This scenario will expose Indian manufacturers to competition from US companies, which are highly capital-intensive.
• The comments from US President Donald Trump on Wednesday also indicated that the deal will allow US companies to compete in India. “I think we are going to have a deal with India. And that is going to be a different kind of a deal. It is going to be a deal where we are able to go in and compete. Right now, India does not accept anybody in. I think India is going to do that, and if they do that, we are going to have a deal for much lower tariffs,” Trump said, ANI News reported.
• Meanwhile, Foreign Institutional Investors (FIIs) have turned cautious ahead of the deadline of the tariff policy imposed by the US on July 9. Foreign investors have sold Indian equities worth Rs. 3,531.76 crores in the first two trading days of July.
• The uncertainty surrounding the reciprocal tariff policy, as the approaching deadline has forced investors to stay on the sidelines. While market experts struggle to gauge its likely impact on the global economy, Washington is still negotiating trade agreements with its major trading partners. Meanwhile, the US has stated that it has struck a deal with Vietnam.
• Meanwhile, the clearance of Trump’s so-called “Big Beautiful Bill” in the Senate with a narrow majority has increased fears of ballooning already fat US debt. Market experts believe that Trump’s tax and spending cut bill will increase the debt burden to $40 trillion over a decade, a move that could bring further downgrades to US Sovereign Credit.
• Trump’s bill has been passed to the House of Representatives for further approval. If approved, it will march to the president’s desk.

Technical Analysis: USD/INR refreshes monthly low near 85.40

The USD/INR pair declines to near 85.40 on Thursday after breaking the three-day trading range between 85.56 and 86.00 on the downside. The near-term trend of the pair was already bearish as it stays below the 20-day Exponential Moving Average (EMA), which trades around 85.90.

The 14-day Relative Strength Index (RSI) stays below 50.00, indicating that the trend is on the downside.

Looking down, the 200-day EMA around 85.35 will act as key support for the major. On the upside, Wednesday’s high of 86.13 will be a critical hurdle for the pair.