USD/INR flattens as investors await US-India trade talks

The Indian Rupee (INR) trades almost steady against its peers at the start of the week. The Indian Rupee stabilizes while rising oil prices and the continued outflow of foreign funds from the Indian stock market keep it broadly under pressure.

Currencies from economies that rely heavily on oil imports to cater to their energy needs face heavy selling pressure in a high crude oil price environment.

Global oil prices have rallied almost 6% since Thursday amid fears of supply disruption, following the civil unrest in Iran, which has resulted in the deaths of almost 500 civilians. “There have also been calls for workers in the oil industry to down tools amid the protests," analysts at ANZ said in a note, Reuters reported, which puts “at least 1.9 million barrels per day (bpd) of oil exports at risk of disruption”.

Meanwhile, consistent selling by Foreign Institutional Investors (FIIs) in the Indian equity market is keeping the Indian Rupee under pressure. So far in January, FIIs have offloaded their stake worth Rs. 11,786.82 crore. Overseas investors have been rigorously paring their stake in the Indian stock market amid trade frictions between the United States (US) and India.

During the day, the US ambassador to India, Sergio Gor, stated that both nations will talk on trade issues on Tuesday, Reuters reported. Gor also said that India will be invited to join Pax Silica in February. Gor's announcement of US-India trade talks on Tuesday has resulted in a strong bounce back from bulls in the Indian equity market. Nifty50 has clawed back its early losses quickly and has turned positive in the afternoon trading hours in India.

On the domestic front, India’s retail inflation data for December has come in lower than projections. The retail Consumer Price Index (CPI) report showed that price pressures grew at an annualized pace of 1.33%, lower than estimates of 1.5%, but faster than 0.71% in November.

Daily Digest Market Movers: Indian Rupee trades calm against US Dollar ahead of India-US inflation data

• The Indian Rupee trades flat against the US Dollar, with the USD/INR pair trading steadily near 90.45. The pair drops marginally as the US Dollar corrects sharply, following the criminal charges against Federal Reserve (Fed) Chair Jerome Powell.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.12% to near 99.10. The DXY corrects after revisiting the monthly high of 99.25.
• The Fed was filled with subpoenas on Friday from the US Department of Justice threatening criminal charges against Jerome Powell over his comments in his Senate testimony last June, which concerned “multiyear renovation of historic buildings at an estimated cost of $2.5 billion”.
• In response, Fed Chair Powell has stated that he has “carried out my duties without political fear or favor and will continue to do so”, and the “new threat is not about his testimony or the renovation project but a pretext”. Powell clarified that criminal charges against him are a “consequence of the Fed setting interest rates based on our assessment of the public interest rather than the president's preferences”.
• In the past, US President Trump has criticized Fed’s Powell several times for not reducing interest rates aggressively.
• Going forward, investors will focus on the US CPI data for December, which will be released on Tuesday. The impact of the US inflation data will be significant on the Fed’s monetary policy outlook. Economists expect US core inflation to rise at a faster pace to 2.7% YoY from 2.6% in November, with headline figures growing steadily by 2.7%.
• On Friday, a lower-than-projected US jobless rate and the strong wage growth measure boosted the appeal of the US Dollar. The Nonfarm Payrolls (NFP) report showed that the Unemployment Rate fell to 4.4% from 4.6% in November, while it was expected to drop to 4.5%. Average Hourly Earnings, a key measure of wage growth, grew at an annualized pace of 3.8%, faster than expectations and the prior reading of 3.6%.

Technical Analysis: USD/INR wobbles around 90.50

In the daily chart, USD/INR trades slightly lower at 90.4665. Price holds above the rising 20- Exponential Moving Average (EMA) at 90.2578, keeping the short-term bias skewed to the upside as the average edges higher.

The 14-day Relative Strength Index (RSI) at 56 (neutral) reflects steady momentum without overbought pressure, allowing room for continuation while above the average.

Pullbacks would be expected to find initial support at the 20-EMA at 90.2578. A decisive break below would lead to further downside towards the December 19 low of 89.50. As long as RSI remains above 50, dips should remain contained, and the price could attempt to revisit the all-time high of 91.55.

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