USD/INR extends growth on fears of escalation that there will be a quick risk-off

Indian rupee depreciates in Thursday’s early European session.
Risk-off sentiment and higher crude oil prices are driving INR down.
Investors are awaiting the September U.S. services PMI on Thursday, ahead of the jobs data.

The Indian rupee (INR) is depreciating during the day under pressure from renewed demand for the US dollar (USD). Risk-free sentiment amid rising geopolitical tensions in the Middle East is boosting flows to unthreatening havens, benefiting the US dollar. Additionally, the rise in crude oil prices is putting some selling pressure on the INR as India is the third largest oil consumer after the United States (US) and China.

Looking ahead, investors will be paying attention to September’s ISM Services Purchasing Managers’ Index (PMI), weekly preliminary jobless claims data and the final S&P Global Services PMI, which will be released later on Thursday. On Friday, the focus will be on US employment data for September, including nonfarm payrolls (NFP), unemployment rate and average hourly earnings. If the jobs report showed a weaker-than-expected result, it could prompt the central bank to consider a deeper interest rate cut, which could put selling pressure on the USD.

Market Overview: Indian rupee remains vulnerable amid multiple headwinds

HSBC’s final Indian manufacturing PMI fell to an eight-month low of 56.5 in September. This result was lower than the market consensus of 56.7 and the previous reading of 57.5.
“The momentum in India’s manufacturing sector weakened in September after very strong growth in the summer months,” said Pranjul Bhandari, chief economist at HSBC India.
According to the Reserve Bank of India’s (RBI) real effective exchange rate (REER) index, the Indian rupee traded 5.5% above its fair value in August, up from 7.7% in the previous month.
ADP’s U.S. employment changes data for September exceeded expectations and added 143,000 jobs. This figure was above the median forecast of 120,000 and the previous reading of 103,000 (corrected from 99,000).
Richmond Fed President Thomas Barkin said on Wednesday that the Fed’s fight to bring inflation back to its 2% target could take longer than expected and limit the possibility of interest rate cuts, according to Reuters.

Technical Analysis: USD/INR Maintains its Constructive Bias

The Indian rupee is depreciating day by day. On the daily time frame, a positive picture prevails for the USD/INR pair as the price remains above the key 100-day Exponential Moving Average (EMA). Moreover, the 14-day Relative Strength Index (RSI) is crossing the midline near 60.30, suggesting that the uptrend is more likely to resume rather than reverse.

The key resistance level for the pair appears at the psychological level of 84.00. Maintaining the bullish trend above this level could pave the way to 84.15, the August 5 high. The next growth barrier is at 84.50.

On the other hand, the initial support level for USD/INR is 83.80, which is the October 1 low. A downside breakout could push the pair further south towards the 100-day EMA at 83.64 and then 83.00, which is the round boundary and May 24 low.