• Indian rupee weakens in Tuesday’s early European session.
• INR faces some selling pressure as Trump’s tariff promise strengthens the dollar.
• The most critical event on Tuesday will be the minutes of the FOMC meeting.

The Indian rupee (INR) attracted some sellers on Tuesday, hitting its highest level in over two weeks. Renewed demand for the US dollar (USD) fueled by good US economic data, escalating tensions in the Russia-Ukraine conflict and US President-elect Donald Trump’s plan for recent tariffs are causing some sell-off in the local currency.

However, proceeds from MSCI index rebalancing, falling US bond yields and lower crude oil prices may lift the INR in the miniature term. Investors will follow the minutes of the FOMC meeting, which will be released on Tuesday. The US Conference Board’s consumer confidence indicators, recent home sales, the Richmond Fed manufacturing index and the Dallas Fed services index will also be released.

Indian rupee remains vulnerable despite MSCI index rebalancing proceeds

• According to estimates by Nuvama Alternative & Quantitative Research, Indian equities will see passive inflows of around $2.5 billion as MSCI equity indices rebalance.
• “The dollar-rupee pair is expected to trade within a range in the medium term, with support at 83.80 and resistance around 84.50. However, the overall sentiment is towards the disadvantages,” said Amit Pabari, Managing Director, CR Forex.
• Chicago Fed President Austan Goolsbee said Monday that he anticipates the U.S. central bank will continue to cut interest rates to levels that do not restrict or promote economic activity.
• Minneapolis Fed President Neel Kashkari noted that it is still appropriate to consider another rate cut at the Fed’s December meeting.
• Traders moderated their expectations for an interest rate cut in December. Futures traders now price in a 55.9% chance the Fed will cut interest rates by a quarter of a point, up from about 69.5% a month ago, according to CME’s FedWatch Tool.

USD/INR’s long-term constructive bias is under pressure

The Indian rupee is depreciating during the day. The USD/INR pair maintains a bullish outlook above the key 100-day exponential moving average (EMA) on the daily chart, even though the price has broken below the uptrend channel. The 14-day Relative Strength Index is trading above the midline near 54.60, supporting buyers in the near term.

The all-time high and the upper boundary of the trend channel at 84.52 seem to be a tough nut to crack for the bulls. A decisive break above this level could pave the way to the psychological level of 85.00.

On the other hand, a potential support level appears at the 84.00-83.90 zone, representing the circular sign and the 100-day EMA. Breaking the mentioned level could reveal 83.65, i.e. the minimum from August 1.