04 Dec 2024

• The Indian Rupee trades modestly flat in Wednesday’s European session.
• The Indian HSBC Services PMI came in at 58.4 in November vs. 59.2 prior, weaker than expected.
• India's disappointing GDP data, foreign fund outflows and strengthening of the USD weigh on the INR. 
• Traders will monitor the US economic data and the Fed Chair Powell’s speech later on Wednesday.
• The Indian Rupee (INR) is trading steadily on Wednesday following its record low in the previous session. Recent data released today indicates a decline in growth within India’s services sector for November, coinciding with the highest price increases observed in over a decade. The HSBC Services Purchasing Managers Index (PMI) registered at 58.4 in November, down from 59.2 in October, and below the anticipated market consensus of 59.5. The Indian Rupee has shown weakness in response to the Services PMI report.
  
  Factors such as India's sluggish Gross Domestic Product (GDP) growth, ongoing capital outflows from Indian markets, and strong demand for the US Dollar (USD) may continue to exert pressure on the local currency in the short term. However, the potential decline of the INR could be mitigated by the Reserve Bank of India's (RBI) foreign exchange interventions through USD sales.
  
  Later today, the US will release the ADP Employment Change report, the final S&P Global Services PMI, the ISM Services PMI, and the Fed’s Beige Book. Furthermore, the speech by Federal Reserve Chair Jerome Powell will be closely monitored, as it may provide insights into the US interest rate expectations for the upcoming December meeting.

• Indian Rupee appears weak amid geopolitical uncertaintie

  The recent increase in hiring is indicative of the sector's enhanced business confidence, a rise in new orders, and robust international demand, as highlighted by Pranjul Bhandari, chief India economist at HSBC.
  
  Vishnu Kant Upadhyay, AVP - Research and Advisory at Master Capital Services Ltd., remarked that the Reserve Bank of India may intervene in the dollar market to temporarily bolster the rupee, although broader economic factors are likely to exert continued pressure on it.
  
  According to a report from the US Bureau of Labor Statistics (BLS) released on Tuesday, the number of job openings in the United States rose from 7.372 million in October to 7.744 million in November, surpassing the market expectation of 7.48 million.
  
  Mary Daly, President of the San Francisco Federal Reserve, stated on Tuesday that she observes progress in inflation and a strong job market, emphasizing the need for the central bank to continue adjusting its policy.
  
  Austan Goolsbee, President of the Chicago Federal Reserve, expressed his belief that interest rates are likely to decrease significantly over the next year, while noting that the Federal Reserve convenes every six weeks to assess changing conditions.
  
  Fed Governor Adriana Kugler commented that the US economy is in a favorable position, having made considerable strides in recent years towards achieving the dual mandates of maximum employment and price stability.
  

  The USD/INR pair maintains a bullish outlook over the long term.
  
  Currently, the Indian Rupee is trading flat for the day. The positive perspective on the USD/INR pair remains intact, as it is firmly supported above the significant 100-day Exponential Moving Average (EMA). The prevailing trend indicates an upward trajectory, bolstered by the 14-day Relative Strength Index (RSI), which is positioned above the midpoint at approximately 67.00, thereby favoring buyers in the short term.
  
  The historical peak of 84.77 serves as the initial resistance level for USD/INR. A significant breakthrough above this threshold could lead to the psychological level of 85.00, with a potential advance towards 85.50.
  
  Conversely, if the pair breaches the resistance-turned-support at 84.55, it may decline to 84.22, which represents the low recorded on November 25. The critical support level is identified at 84.00, coinciding with the 100-day EMA and a round figure.