USD/INR trades on a positive note ahead of Fed rate decision – FXStreet

• On Tuesday, the Indian rupee lost momentum due to the strength of the US dollar.
• The Fed is expected to keep interest rates on hold at a range of 5.25% to 5.50% at its March meeting.
• The US Federal Reserve’s interest rate decision on Wednesday will be the highlight of the week.

The Indian rupee (INR) fell on Tuesday following purchases of the US dollar (USD) by state-run banks. A decline in expectations that the US Federal Reserve (Fed) could cut interest rates in June provided some support to the US dollar and boosted the USD/INR pair. The Fed is widely expected to keep interest rates on hold for the fifth straight time at its March meeting on Wednesday, maintaining a data approach that aims for inflation to return sustainably to its 2% target. Still, it’s still possible that Fed officials will reduce the number of rate cuts to two from the three they expected earlier this year.

Looking ahead, U.S. building permits and housing starts for February are expected to be released on Tuesday. Investors will be closely monitoring the Federal Reserve’s interest rate decisions on Wednesday and will likely get further hints about the future trajectory of interest rates from Fed Chairman Jerome Powell at his press conference. India’s S&P Global Manufacturing and Services PMI will be released on Thursday.

Daily Digest Market Drivers: Indian Rupee Remains Vulnerable Amid Global Uncertainty

• Foreign investors bought around 100 billion rupees ($1.21 billion) worth of bonds on a net basis in March, taking their total net purchases in the first two months of 2024 to more than 375 billion rupees.
• Foreign portfolio investors increased their holdings in Indian government bonds by about 50% in less than six months after news of the index’s inclusion.
• According to the Reserve Bank of India (RBI), India’s foreign exchange will increase from $6.55 billion to $625.63 billion in just two years, and India’s gold reserves will increase from $569 million in 2021 to March 2024. increased to $48.4 billion this week.
• Federal Reserve Chairman Jerome Powell said earlier this month that the U.S. central bank could lower its benchmark interest rate before the end of the year, although there is “no guarantee” that continued progress will be made in efforts to bring inflation down to target.
• Investors are pricing in a nearly 73% chance that the Fed will cut interest rates in July, according to the CME FedWatch tool.

Technical Analysis: Indian Rupee remains confined to a long-term range between 82.60 and 83.15.

The Indian rupee depreciated on this day. USD/INR has been stuck in a range theme within a multi-month downtrend channel around 82.60-83.15 since December 8, 2023.

From a technical perspective, USD/INR remains below the key 100-day exponential moving average (EMA) on the daily time frame, which maintains the bearish outlook for USD/INR in the near term. However, the 14-day Relative Strength Index (RSI) is above the midline of 50.0, indicating that further upside cannot be ruled out.

The first upside barrier appears near the 100-day EMA and the psychological mark of 83.00. Further strength could attract USD/INR bulls and prompt a further rally to the top of the downtrend channel around 83.15. A decisive break above this level will lead to a rise to 83.35 (January 2nd high) followed by a round number of 84.00.

Conversely, the first support level for USD/INR appears to be around the March 14 low of 82.80. The main contending level is located at the lower limit of the downtrend channel at 82.60. A follow-through sell could extend the pair’s downtrend to 82.45 (August 23rd low) on the way to 82.25 (June 1st low).