USD/INR weakens as Fed maintains status quo

• Indian Rupee holds mild gains on a decline in US yields, US Dollar. 
• The Federal Open Market Committee (FOMC) decided to hold the rate steady at its November meeting. 
• The US Nonfarm Payrolls (NFP) will be closely watched later this week. 

Indian Rupee posts modest gains on Thursday on lower US Treasury bond yields and the correction of the US Dollar (USD). The Federal Open Market Committee (FOMC) kept the federal funds rate unchanged at the 5.25-5.50% range at its November meeting on Wednesday, as widely expected. The Greenback edges lower as the markets anticipate that the US rate hike cycle is already over, despite Fed Chair Jerome Powell opening the door for another rate hike.

Nonetheless, the Indian Rupee remains sensitive to risk sentiment and global factors. The escalating tension in the Middle East and higher crude oil prices might contribute to the risk-off environment and cap the upside of the Indian Rupee. Investors will monitor the US weekly Initial Jobless Claims for the week ending October 27 on Thursday. The US Nonfarm Payrolls (NFP) will be in the spotlight on Friday.

Daily Digest Market Movers: Indian Rupee trades firmly amid the multiple challenges

• Indian government bond rates dropped in early trading on Thursday, following a dip in US yields.
• Traders' attention will turn to debt sales, as India plans to sell its longest-duration bond on Friday, which is expected to see strong demand
• The Reserve Bank of India (RBI) has appointed Mr Manoranjan Mishra as Executive Director.
• RBI announced the debut of the 'Inflation Expectations Survey of Households' and the 'Consumer Confidence Survey,' which would offer key inputs for the bi-monthly monetary policy.
• RBI Governor Shaktikanta Das said GDP growth for the second quarter of FY24 would surpass estimations.
• Geopolitical risks are the biggest challenge for India, but RBI Governor Das said India is better placed compared to other countries to deal with any potentially risky situation.
• Foreign investors sold $2.74 billion in Indian equities in October, marking the largest monthly sell-off since January 2023.
• The Federal Open Market Committee (FOMC) decided to hold the interest rate unchanged at its November meeting on Wednesday, as widely expected.
• The probability that the Fed would not raise another rate rose during the press conference.
• The 10-year US Treasury yield was close to 4.70%, as the odds of a rate hike in December rate fell to 15%.
• The US Private Sector Payroll rose by 113K from 89K in September, below the 150k rise expected.
• US JOLTS Jobs Opening climbed to 9.553M, better than the estimation of 9.25M.
• The US ISM Manufacturing PMI dropped to 46.7 in October from the previous reading of 49.0, the lowest reading since July 2023.

Technical Analysis: Indian Rupee recovers, upside potential seems limited

The Indian Rupee stages a modest recovery on the day. The USD/INR pair has traded within a familiar range of 83.00–83.35 since September. In the meantime, USD/INR keeps a bullish stance as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA) on the daily chart. 

That being said, the key support level will emerge at the confluence of a low from October 24 and a round level marked at 83.00. A breach below 83.00 will see a drop to a low of September 12 at 82.82. Further south, the next contention level to watch is a low of August 4 at 82.65.

On the upside, the upper boundary of the trading range at 83.35 acts as an immediate upside barrier for the pair. Any decisive follow-through buying above the latter will pave the way to the year-to-date (YTD) highs of 83.45. The additional upside filter is located near a psychological round figure at 84.00.