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- Indian Rupee trades in negative territory in Tuesday’s Asian session.
- Optimism from US-China trade talks underpins the US Dollar and drags the INR lower.
- Traders brace for the Indian and US CPI reports, due later on Tuesday.
The Indian Rupee (INR) softens on Tuesday, pressured by the firmer Greenback. Positive indications from the United States and China trade talks lift the US Dollar (USD) and weigh on the Indian currency. Additionally, an intensification of the India-Pakistan conflict might exert some selling pressure on the local currency.
Nonetheless, foreign portfolio investors (FPIs) have resumed buying of Indian equities, which might provide some support to the INR. Looking ahead, investors will keep an eye on the Indian Consumer Price Index (CPI) for April, which will be released later on Tuesday. On the US docket, the CPI inflation report is also due. The headline CPI is expected to show an increase of 2.4% YoY in April, while the core CPI is projected to show a rise of 2.8% YoY in the same report period.
Indian Rupee loses traction amid US-China trade deal progress
- India’s Prime Minister Narendra Modi on Monday stated that India will not tolerate any “nuclear blackmail.” Modi added that operations against Pakistan have only been paused, and the future will depend on their behavior.
- The ceasefire remained intact in Jammu and Kashmir and across border towns overnight, following PM Modi’s stern message to terrorists and Pakistan.
- US President Donald Trump agreed to cut extra tariffs imposed on Chinese imports in April this year to 30% from 145%, and Chinese duties on US imports will be reduced to 10% from 125%. The fresh measures are effective for 90 days.
- Swap markets have priced in the Fed’s first 25 basis points (bps) rate cut for the September meeting, and they expect two additional rate reductions towards the end of the year. Last week, they indicated three cuts this year, with a change likely as soon as July.
USD/INR keeps the bearish vibe below the key 100-day EMA
The Indian Rupee edges lower on the day. The bearish outlook of the USD/INR pair prevails as the price remains capped under the key 100-day Exponential Moving Average (EMA) on the daily chart. The downward momentum is supported by the 14-day Relative Strength Index (RSI), which stands below the midline near 44.15, suggesting that further downside looks favorable.
The first downside target for USD/INR emerges at 84.53, the low of May 8. Red candlesticks below this level could see a drop to 84.12, the low of May 5. The next contention level to watch is 83.76, the low of May 2.
On the other hand, the 85.00 psychological level acts as the immediate resistance level for the pair. Sustained trading above the mentioned level could see a rally to 85.60, the 100-day EMA, en route to 86.00, the upper boundary of the trend channel and round figure.
