OCBC Bank’s Christopher Wong argues that recent RBI measures and the governor’s willingness to act further have curbed speculative activity and supported the Indian Rupee. However, stronger US Dollar, elevated Oil prices and external headwinds are seen limiting gains, with technicals pointing to moderating downside in USDINR and key support at 94.70 and 94.20 and resistance around 95.60 and 96.

RBI action vs USD and Oil headwinds

“USD/INR briefly traded below 95 before erasing losses into the close. Firmer USD and oil played a role in disrupting INR’s recovery momentum. Nevertheless, the speed and breadth of RBI’s recent measures reflected a strong sense of urgency to curb speculative activity and stabilise the currency.”

“Governor Malhotra’s willingness to consider further measures should also make markets more cautious about building fresh short-INR positions.”

“We may still see some room for near-term INR recovery, although the external environment remains challenging. Overnight, stronger-than-expected US CPI lifted the USD and US Treasury yields, while elevated oil prices remain a drag on India’s external balance. These developments reinforced our view that while regulatory measures can contain speculative pressures and offer near-term support, they cannot fully insulate INR from external headwinds.”

“A more sustained recovery would likely require some easing in oil prices and USD strength.”

“Daily momentum turned bearish while RSI fell. Lingering bearish pressure remains on the cross but moderating RSI and price action overnight cautioned for a moderation in the pace of decline for the pair, especially after a near 2% drop in 4 sessions. Support at 94.70 levels (50% fibo retracement of Apr low to Oct high, recent low) and 94.20 (61.8% fibo). Resistance at 95.60 levels (50, 100 DMAs), 96 levels (21 DMA).”