USD/INR gathers strength ahead of Indian CPI data

• Indian Rupee trades on a negative note on Friday.
• Rising oil prices and higher US Treasury bond yields could weigh on the INR, limiting the downside of USD/INR.
• The Indian March CPI inflation report and US April Michigan Consumer Sentiment Index will be in the spotlight on Friday. 

Indian Rupee (INR) trades softer on Friday amid the renewed US Dollar (USD) demand. The rise in oil prices and higher US Treasury bond yields might drag the INR lower and cap the downside of USD/INR. However, the robust Indian economic performance and positive longer-term outlook might lift the INR.

Investors will keep an eye on the Indian CPI inflation report for March and Industrial Production for February, due on Friday. A hotter-than-expected Indian inflation data could further boost the INR. On the US docket, the preliminary US Michigan Consumer Sentiment Index for April will be released later, along with the Fed’s Bostic and Daly speech.  

Daily Digest Market Movers: Indian Rupee remains strong due to the robust Indian economy

• Sanjeev Sanyal, a member of the Economic Advisory Council to the Prime Minister (EAC-PM), said that India’s economic growth performance is ‘good’ and that efforts are needed to maintain it since worries about global factors remain unresolved.
• India’s CPI inflation is expected to show an increase of 4.91% in March, according to a Reuters poll. The figure remains above the Reserve Bank of India’s (RBI) 4% medium-term target as persistent food price increases.
• The US Producer Price Index (PPI) data for March rose by 2.1% YoY, missing the estimation of 2.2%. The core PPI, excluding volatile food and energy prices, climbed by 2.4% YoY, compared to the market consensus of 2.3%.
• The recent US CPI inflation data and Nonfarm Payrolls (NFP) triggered the speculation that the Fed will have to push back the number and timing of interest rate cuts this year.
• Investors are now pricing in only two rate cuts this year, which will most likely begin in September, according to CME FedWatch Tool. 

Technical analysis: USD/INR keeps bullish stance in the longer term

The Indian Rupee trades stronger on the day. USD/INR prospects remain positive in the long term since the pair has risen above a nearly four-month-old descending trend channel since March 22. 

In the near term, USD/INR is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is backed by the 14-day Relative Strength Index (RSI), which holds in bullish territory around 55.00, suggesting that further upside looks favorable. 

The immediate resistance level of the pair will emerge near a high of April 11 at 83.40. The next hurdle is located at an all-time high of 83.70, en route to the 84.00 psychological level. On the flip side, the potential support level is seen near the congestion of the round figure and the 100-period EMA at the 83.00–83.10 region. A decisive break below this zone might pave the way to a low of March 14 at 82.80, followed by a low of March 11 at 82.65.