USD/INR: Dismal Data Sinks the Indian Rupee
USD/INR jumped +0.6% on Wednesday, snapping the rupee’s four-day winning streak, after economic data showed the Indian economy is in reverse.
Yesterday’s price action is in stark contrast to the previous day’s. On Tuesday, the Indian rupee posted its best day against the greenback in almost a year, closing at a five-week high of 78.58. However, a slew of negative data is in danger of reversing the rupee’s recent strength.
India’s Service PMI slumped to 55.5 in July from 59.2 the previous month. Composite PMI data for July also came in lower at 56.6 vs. 58.2 in June. The trade deficit number was even more worrying.
India’s trade deficit ballooned to $31.02 billion last month, a record low, and almost $5b wider than in June.
Where it not for a sharp decline in the price of oil, the rupee’s slide could have been much worse.
WTI oil slide -4% to multi-month lows Wednesday after an unexpected rise in US inventories and OPEC agreeing to increase production. India is the world’s third-largest importer of Oil, with around 90% of its supply priced in US dollars. Subsequently, lower oil prices should help to narrow the nation’s trade deficit moving forward.
US Data in Focus
Tomorrow investors will learn how the US labor market is holding up. The Nonfarm Payrolls (NFP) release is forecast to show the US economy added 270k new jobs in July vs a 381k increase in June. With the unemployment rate expected to remain stable at 3.6%. Due to the data’s significance, we can expect to see US dollar volatility should the releases surprise in either direction.
US Dollar to Indian Rupee Forecast
From a technical standpoint, yesterday’s move higher could be considered extremely bullish for the USD/INR pair.
The upside extension took the price back above the 50-Day Moving Average (DMA) at 78.73 (green line). Furthermore, the Relative Strength Index has turned higher, suggesting bearish momentum has reversed. Subsequently, the improving technical landscape could force traders to unwind bearish bets. With this in mind, the dollar could soon push towards the all-time high of 80.21 recorded in July.
That being said, a close back beneath the 50-DMA could put the bears back in the driving seat.
USD/INR Price Chart
