USD/INR Price Forecast: 50-day EMA continues to provide support to Indian Rupee

USD/INR closed 0.1% down to near 88.00 on Monday.
US President Trump criticizes India again for purchasing oil from Russia.
Investors await the US CPI data for fresh cues on the monetary policy outlook.

Sagar Dua FXStreet

The USD/INR pair ended Monday’s session with almost 0.1% losses to near 88.00. On Tuesday, Indian markets are closed due to Diwali Laxmi Pujan and will also remain closed on Wednesday on account of Balipratipada.

On Monday, the USD/INR faced selling pressure even as the US Dollar (USD) traded firmly due to receding trade tensions between the United States (US) and China. Trade frictions between the world’s two largest powerhouses have eased as President Donald Trump has expressed confidence that he will reach a deal with Beijing after meeting with Chinese leader Xi Jinping in South Korea later this month.

This week, the major trigger for the US Dollar will be the delayed US Consumer Price Index (CPI) data for September, which will be published on Friday. The inflation data will significantly influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. According to the CME FedWatch tool, traders seem confident that the Fed will cut interest rates in both policy meetings remaining this year.

Meanwhile, the outlook of the Indian Rupee remains uncertain as trade tensions between India and the US have not been resolved yet. Over the weekend, US President Trump threatened that higher tariffs on imports from New Delhi will remain intact unless they halt buying seaborne crude oil from Russia.

USD/INR started the week on a cautious note, dropping to near 88.00. The 50-day Exponential Moving Average (EMA) near 88.13 is acting as a key barrier for the USD/INR bulls.

The 14-day Relative Strength Index (RSI) falls to near 40.00. A fresh bearish momentum could emerge if the RSI stays below that level.

Looking down, the August 21 low of 87.07 and the July 28 low of 86.55 would act as major support levels for the pair. On the upside, the 20-day EMA near 88.50 and the all-time high around 89.10 would be key barriers.

USD/INR daily chart

Indian economy FAQs

How does the Indian economy impact the Indian Rupee?

The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.

What is the impact of Oil prices on the Rupee?

India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.

How does inflation in India impact the Rupee?

Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.

How does seasonal US Dollar demand from importers and banks impact the Rupee?

India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

AUD/USD sticks to positive bias above 0.7100; lacks bullish conviction

AUD/USD trades with a positive bias for the second straight day, holding above 0.7100 in the Asian session on Friday as softer US bond yields keep US Dollar bulls on the back foot. Furthermore, hawkish RBA Governor Bullock's comments boost rate hike bets and support the Aussie. However, the Fed's hawkish outlook, along with geopolitical uncertainties, limits USD losses and caps the pair.

USD/JPY approaches 158.00 as Japanese Yen resumes decline

USD/JPY is resuming its upside in the European session on Friday, refreshing two-week highs and nearing 158.00. The Japanese Yen extends losses, despite the Bank of Japan's (BoJ) expected rate hike to 1.25% and hawkish Governor Ueda's comments, as two surprise dissents against the rate hike weigh on it.

Gold keeps the bid tone in place; still below $4,400

Gold adds to the optimism seen in the second half of the week, trading with decent gains just below the $4,400 mark per troy ounce on Friday. The precious metal’s advance finds traction in declining crude oil prices and fresh selling pressure on the US Dollar.

Why altcoin season isn't coming back — and what stole its capital

If, after two years of being frozen in ice, Katara and Sokka woke you up to the crypto market, it would seem like 100 years have passed. With Bitcoin soaring to record highs just over a year ago, everyone expected a routine altcoin season, where investors take profits from the top crypto to chase higher returns in altcoins.

BoJ Recap: Not as hawkish as expected

The BoJ raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks. Governor Kazuo Ueda said the policy phase had changed.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.