USD/INR climbs back closer to 100-day SMA hurdle near 83.65 amid modest USD strength

Indian Rupee attracts some sellers on Tuesday amid a modest pickup in the USD demand.
Dovish Fed expectations to cap the USD uptick and cap the upside for the USD/INR pair.
Traders await Fedspeaks and the US PCE Price Index before placing fresh directional bets.

Lallalit Srijandorn FXStreet

The Indian Rupee (INR) ticks lower against its American counterpart for the second successive day on Tuesday and lifts the USD/INR back to the 100-day Simple Moving Average (SMA) resistance near the 83.65 area. A modest uptick in the US Treasury bond yields helps revive the US Dollar (USD) demand, which, in turn, is seen as a key factor acting as a tailwind for the currency pair.

That said, expectations for another oversized interest rate cut by the Federal Reserve (Fed) might keep a lid on the USD and limit losses for the INR. Traders might also refrain from placing aggressive directional bets and prefer to wait for more cues about the Fed's rate-cut path. Hence, the focus remains on speeches by FOMC members and the US Personal Consumption Expenditures (PCE) Price Index on Friday.

Daily Digest Market Movers: Indian Rupee is undermined by the emergence of some USD buying

The flash HSBC India Manufacturing Purchasing Managers Index (PMI) eased to 56.7 in September from the previous reading of 57.5. The Services PMI declined to 58.9 versus 60.9 prior.
"The flash Composite PMI in India rose at a slightly slower pace in September, marking the slowest growth observed in 2024," noted Pranjul Bhandari, chief India economist at HSBC.
Chicago Fed President Austan Goolsbee noted, “Many more rate cuts are likely needed over the next year, rates need to come down significantly.”
Atlanta Fed President Raphael Bostic stated that cutting the cycle with a large move will help bring interest rates closer to neutral levels as the risks between inflation and employment become more balanced.
Minneapolis Fed President Neel Kashkari said that he expects to lower interest rates by quarter-point moves at each of the central bank’s two remaining meetings this year, per Bloomberg.
The flash reading of the US Manufacturing PMI dropped to a 15-month low of 47.0 in September from 47.9 in August, weaker than the estimations of 48.5. Meanwhile, the Services PMI eased to 55.4 in August versus 55.7 prior, above the market consensus of 55.2.

Technical Analysis: USD/INR flirts with 100-day SMA pivotal support-turned-resistance, not out of the woods yet

The Indian Rupee trades flat on the day. The USD/INR pair keeps the bearish vibe on the daily timeframe as it holds below the key 100-day Exponential Moving Average (EMA). The path of least resistance level is to the downside as the 14-day Relative Strength Index (RSI) stands in the bearish zone near 33.70.

The initial support level for the pair is located at 83.30, the low of June 19. The additional downside filter to watch is the 83.00 round mark.

On the flip side, the first upside barrier for USD/INR emerges near the 100-day EMA at 83.68. Any follow-through buying above this level could see a rally to the key resistance level at the 84.00 psychological mark.

Economic Indicator

Personal Consumption Expenditures - Price Index (YoY)

The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

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