USD/INR recovers ahead of Indian/US PMI releases

• Indian Rupee loses traction in Thursday’s Asian session.
• The renewed US Dollar demand from foreign banks supports the INR. 
• The preliminary Indian HSBC PMI and US S&P PMI reports for May will be the spotlights later on Thursday. 

The Indian Rupee (INR) loses ground on Thursday. The strong demand for the US Dollar (USD) from foreign banks, likely on behalf of custodial clients, drags the INR lower. Additionally, the rising expectation that the Reserve Bank of India (RBI) will deliver a rate cut in its upcoming Monetary Policy Committee meeting might undermine the local currency. Nonetheless, lower crude oil prices and a multi-phase trade deal between the US and India might provide some support to the Indian currency.

Investors will closely watch the preliminary reading of India’s HSBC Purchasing Managers Index (PMI) for May, which is due later on Thursday. On the US docket, the advanced S&P PMI for May, the Chicago Fed National Activity Index, the weekly Initial Jobless Claims and Existing Home Sales reports will be published. 

Indian Rupee weakens amid renewed US Dollar demand

• India’s Commerce and Industry Minister Piyush Goyal said that India and the US may finalise the first phase of the India-US trade deal before July.
• The RBI monthly bulletin released in May stated that the global growth outlook remains fragile despite the US having paused tariffs. The RBI added that heightened policy uncertainty and weak consumer sentiment weighed on the outlook.
• Moody’s Ratings said on Wednesday that India is well-positioned to deal with the negative effects of US tariffs and global trade disruptions, as domestic growth drivers and low dependence on exports anchor the economy.
• House Speaker Mike Johnson said that Trump met with House Republicans on Tuesday and failed to convince his party’s holdouts to back his sweeping tax bill. Republican hardliners continue to argue the bill does not sufficiently cut spending.
• Several Federal Reserve (Fed) officials indicated in speeches this week that the US central bank is unlikely to lower its key fed funds rate at its two meetings this summer. 
• Markets have priced in nearly a 71% chance that the Fed would keep its interest rates steady through its next two meetings, according to the CME FedWatch tool.

USD/INR’s bearish outlook remains in play under the 100-day EMA

The Indian Rupee edges lower on the day. The USD/INR pair maintains a bearish tone on the daily timeframe, with the price remaining capped below the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) hovers around the midline. This indicates the neutral momentum in the near term, suggesting that further consolidation or temporary recovery cannot be ruled out. 

The low of May 19 at 85.34 acts as an initial support level for USD/INR. Any follow-through selling below this level could see a drop to the 85.00 psychological level, followed by 84.61, the low of May 12. 

On the other hand, the crucial resistance level to watch is the 100-day EMA at 85.60. A decisive break above the mentioned level could potentially lift the pair back up to 85.85, the upper boundary of the trend channel.