- The Indian rupee is expected to strengthen in early European trading on Tuesday.
- New tax reforms introduced by Prime Minister Modi’s administration are likely to bolster the INR, though global uncertainties may affect its overall impact.
- Traders are looking forward to the HSBC PMI data for India to be released on Thursday, ahead of the Jackson Hole Economic Policy Symposium.
The Indian Rupee (INR) is set to gain ground on Tuesday. Prime Minister Narendra Modi has unveiled significant tax reforms, the most substantial since 2017, positively impacting sectors like automobiles, financial services, real estate, consumer goods, and cement. Following the removal of certain tax structures, a surge in Indian stocks may further support the currency in the near term.
On another note, ongoing trade tensions between the US and India might keep the INR under pressure. President Trump has announced a delay on new tariffs affecting countries like China, which continues purchasing Russian oil, but he didn’t mention India. Still, India is facing an additional 25% duty starting August 27.
The preliminary report of the HSBC Purchase Manager Index (PMI) for India in August will feature prominently on Thursday. Traders will also keep a close eye on the Federal Reserve’s annual symposium at Jackson Hole this Friday, where Chairman Jerome Powell is expected to discuss the economic outlook and policy frameworks.
Daily Digest Market Mover: Indian Rupee rises along with tax cuts
- White House trade advisor Peter Navarro stated late Monday that India’s procurement of Russian crude oil has financed the war in Ukraine, and this needs to stop as the US increases its pressure on energy imports from Russia.
- Trump mentioned that the US would “support” Europe in ensuring Ukraine’s security, expressing hopes that discussions could eventually lead to a trilateral meeting with Russian President Putin.
- Trump retracted his previous call for a ceasefire, suggesting that negotiations for peace in the ongoing conflict resulting from Russia’s invasion could proceed even while fighting continues.
- Last week, S&P upgraded India’s rating from BBB to BBB with a stable outlook, indicating that economic growth expectations are unlikely to be impacted by the Trump administration’s tariff measures.
- As indicated by the CME FedWatch tool, traders have estimated an 83% likelihood of a rate cut by the Fed in September, following last week’s developments.
Technical Analysis: USD/INR shows positive outlook beyond 100-day EMA
The Indian rupee is trading positively today. Nevertheless, the USD/INR pair continues to maintain an optimistic aura, remaining above the crucial 100-day exponential moving average (EMA) on daily charts. Moreover, the 14-day relative strength index (RSI) is above the midpoint, hovering at around 56.75, indicating that the most favorable path seems to be upward.
The first resistance level for the pair is at 87.74, which was reached on August 8. Should strong upward movements and solid candlestick formations occur beyond these levels, a rise towards the 88.00-88.05 range could follow.
If bearish trends appear, the initial support for USD/INR stands at 87.06, based on July 30th’s low. Sustained trading below this level might pull the pair down to a significant support at 86.25, aligning with the 100-day EMA and the lower edge of the trending channel.
