USD/INR extends the rally ahead of US employment data

Indian Rupee trades with a bearish tone in the shorter-term during Friday’s Asian session.
Increased importers’ USD demand undermines the INR, but RBI’s intervention and rising Fed rate cut bets might cap its downside. The US August employment report will be in the spotlight later on Friday.

The Indian Rupee (INR) edges lower on Friday after retreating to its record closing low in the previous session. Traders remain vigilant for possible interventions from the Reserve Bank of India (RBI) through USD sales, which prevented the INR from depreciating past the crucial 84 level. However, the US Dollar (USD) demand from oil importers and foreign portfolios might weigh on the local currency.

Investors will closely monitor the US August employment data on Friday, including Nonfarm Payrolls (NFP), Unemployment Rate and Average Hourly Earnings. Any sign of further weakening in the labor market could prompt the expectation of a deeper rate cut by the Federal Reserve (Fed). This, in turn, could exert some selling pressure on the Greenback, making other currencies like Indian Rupee more attractive.

Daily Digest Market Movers: Indian Rupee edges lower amid importers’ USD demand

“Rupee makes a new all-time low of Rs 83.99 per dollar as importers, FPIs and oil companies continue buying while RBI ensures that it does not cross Rs 84.00 per dollar, a psychological level,” said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.
Private sector employment increased by 99,000 in August and annual pay was up 4.8% year-over-year, Automatic Data Processing (ADP) reported on Thursday. This figure followed the 111,000 (revised from 122,000) increase seen in July and below the estimation of 145,000 by a wide margin.
The weekly US Initial Jobless Claims rose to 227,000, compared to the previous reading of 232,000 (revised from 231,000) and below the initial consensus of 230,000.
US ISM Services PMI increased to 51.5 in August from 51.4 in July, beating the estimation of 51.1.
Chicago Fed President Austan Goolsbee said on Friday that the longer-run trend of labor market and inflation data justify the Fed easing interest-rate policy soon, and then steadily over the next year.

Technical Analysis: USD/INR’s broader trend remains constructive

The Indian Rupee weakens on the day. The USD/INR pair remains confined within an ascending triangle on the daily chart. However, in the long term, the pair maintains the bullish vibe unchanged as the price holds above the key 100-day Exponential Moving Average (EMA). The upward momentum is reinforced by the 14-day Relative Strength Index (RSI) which stands in bullish territory near 59.55, supporting the buyers in the near term.

Sustained trading close above the 84.00-84.05 zone, the confluence of the psychological figure, the upper boundary of the triangle and the high of September 4, could see an upside breakout that may take USD/INR up to 84.50.

Any follow-through selling could drag the pair down to the ascending triangle support near 83.90. A breach below this level could revisit the 100-day EMA at 83.64.