USD/INR falls on improving risk appetite and weakening US dollar

The Indian rupee strengthens on Wednesday at the start of the European session.
Rising risk appetite and weakening US dollar support INR.
Investors are awaiting U.S. recent home sales data for August and Federal Reserve President Kugler’s speech on Wednesday.

The Indian Rupee (INR) rose modestly on Wednesday. Improving risk appetite following Chinese stimulus measures and a weaker US Dollar (USD) supported the local currency during the day. However, rising crude oil prices, outflows related to the FTSE stock indices reshuffle and renewed USD demand from huge Indian importers could exert some selling pressure on the INR.

US recent home sales data for August is due on Wednesday. Traders will take more cues from a speech by US Federal Reserve (Fed) Governor Adriana Kugler. Any dovish remarks from Fed officials are likely to weigh on the US dollar against the Indian rupee. The main event this week will be the US personal consumption expenditures (PCE) price index data for August, due on Friday.

Daily Market Update: Indian rupee remains stronger amid global risk-on sentiment

Rating agency S&P Global Ratings on Tuesday maintained India’s gross domestic product (GDP) growth forecast at 6.8%, while noting that the Reserve Bank of India (RBI) may cut interest rates in October.
“We expect the rupee to trade with a positive bias amid an improvement in global risk appetite following the Chinese stimulus and a weakening dollar. However, high oil and other commodity prices could limit the rally,” noted Anuj Choudhary, research analyst at Sharekhan at BNP Paribas.
The Conference Board’s U.S. Consumer Confidence Index fell to 98.7 in September from a revised 105.6 in August. That number was the biggest decline since August 2021.
Fed Governor Michelle Bowman said Tuesday that key inflation measures remain “troublingly above” the 2% target, warranting caution as the Fed continues to cut interest rates. But she preferred the Fed to cut rates by a quarter of a percentage point, which is more in line with the central bank’s conventional moves.
According to the CME FedWatch Tool, markets have priced in a 56% probability of a second 50 basis point rate cut at the November meeting, while the probability of a 25 basis point cut is 44%.

Technical Analysis: USD/INR Negative View Remains Unchanged in Longer Term

The Indian Rupee is trading stronger on the day. The negative outlook for the USD/INR pair prevails as the price remains capped by the key 100-day exponential moving average (EMA) on the daily chart. The downside momentum is supported by the 14-day Relative Strength Index (RSI) which is trading below the midline near 36.00.

The first downside target for the pair comes in at 83.44, the September 23 low. A break of this level would see a decline to key support at 83.00, representing a psychological level and the May 24 low.

Sustained trading above the 100-day EMA at 83.62 could pave the way for the support-turned-resistance level at 83.75. The key barrier for the USD/INR pair is at the round level of 84.00.