USD/INR edges higher as Trump’s tariff plans boost US Dollar

• The Indian Rupee weakens in Tuesday’s Asian session.
• The INR is facing some selling pressure as Trump’s tariff promise boosts the USD. 
• The FOMC Minutes will be the highlight on Tuesday. 

The Indian Rupee (INR) attracts some sellers on Tuesday after reaching its strongest level in over two weeks. The renewed US Dollar (USD) demand driven by strong US economic data, escalating tensions in the Russia-Ukraine conflict and US President-elect Donald Trump’s plan on new tariffs exert some selling on the local currency. 

However, inflows from MSCI’s index rebalancing, declining US bond yields and lower crude oil prices could lift the INR in the near term. Investors will monitor the FOMC Minutes, which are due later on Tuesday. Also, the US Conference Board’s Consumer Confidence, New Home Sales, the Richmond Fed Manufacturing Index and the Dallas Fed Services Index will be released. 

Indian Rupee remains weak despite inflows from MSCI’s index rebalancing  

• Indian equities are estimated to see passive inflows of about $2.5 billion on account of the rebalancing of MSCI’s equity indexes, according to estimates by Nuvama Alternative & Quantitative Research.  
• “The dollar-rupee pair is anticipated to trade within a defined range in the medium term, with support at 83.80 and resistance around 84.50. The overall bias, however, tilts toward the downside,” said Amit Pabari, managing director at CR Forex.
• Chicago Fed President Austan Goolsbee said on Monday that he foresees the US central bank continuing to lower rates toward a stance that neither restricts nor promotes economic activity. 
• Minneapolis Fed President Neel Kashkari noted that it is still appropriate to consider another interest-rate cut at the Fed’s December meeting. 
• Traders pared back their expectations for an interest rate cut in December. Futures traders are now pricing in 55.9% odds that the Fed will cut rates by a quarter point, down from around 69.5% a month ago, according to the CME FedWatch Tool. 

USD/INR’s longer-term constructive bias is under pressure

The Indian Rupee weakens on the day. The USD/INR maintains the bullish outlook above the key 100-day Exponential Moving Average (EMA) on the daily chart, even though the price has broken below an ascending trend channel. The 14-day Relative Strength Index stands above the midline near 54.60, supporting the buyers in the near term. 

The all-time high and the upper boundary of the trend channel of 84.52 appears to be a tough nut to crack for the bulls. A decisive break above this level could pave the way to the 85.00 psychological level.

On the flip side, the potential support level emerges in the 84.00-83.90 zone, representing the round mark and the 100-day EMA. A breach of the mentioned level could expose 83.65, the low of August 1.