USD/INR softens ahead of US GDP data

• The Indian Rupee strengthens in Thursday's Asian session.
• Likely RBI intervention might help limit the INR's losses. 
• The advanced US Q4 GDP report is due later on Thursday.

The Indian Rupee (INR) recovers some lost ground on Thursday after facing some selling pressure in the previous session. US Dollar sales by public sector banks, likely on behalf of the Reserve Bank of India (RBI) helped contain excess volatility in the local currency.

However, the month-end USD demand, maturity of positions in the non-deliverable forwards (NDF) market and cautious mood could weigh on the INR. Meanwhile, persistent foreign outflows and uncertainty about US President Donald Trump's approach to trade tariffs might contribute to the INR's downside. 

Investors brace for the advance US Gross Domestic Product (GDP) data for the fourth quarter (Q4), including the weekly Initial Jobless Claims, and Pending Home Sales. On Friday, India's Federal Fiscal Deficit will take center stage.

Indian Rupee rebounds despite Trump tariff threats 

• Overseas investors have sold nearly $9 billion of local stocks and bonds so far in January. 
• The Fed held its overnight borrowing rate in a range between 4.25%-4.50% at its January meeting on Wednesday, as widely anticipated. 
• During the press conference, Fed Chair Jerome Powell said that the central bank would need to see "real progress on inflation or some weakness in the labor market before we consider making adjustments."
• Powell further stated that the committee is in wait-and-see mode, citing the uncertainty surrounding tariffs, immigration, fiscal policy, and regulatory policy under the Trump administration. 
• Late Wednesday, US President Donald Trump's administration plans to rescind a climate rule adopted by the administration of former President Joe Biden requiring states to measure and set declining targets for greenhouse gas emissions from vehicles using the national highway system, per Reuters. 

USD/INR's outlook remains positive in the longer term

The Indian Rupee trades on a positive note on the day. The USD/INR pair remains capped within a narrow trading range on the daily timeframe. The positive bias of the USD/INR pair prevails as the price is well-supported above the key 100-day Exponential Moving Average (EMA). The upward momentum is reinforced by the 14-day Relative Strength Index (RSI), which is located above the midline near 64.05, suggesting the path of least resistance is to the upside. 

On the bright side, the immediate resistance level for USD/INR is seen at an all-time high of 86.69. Extended gains above this level could pave the way to the 87.00 psychological mark.

On the flip side, the first downside target to watch is 86.31, the low of January 28. Any follow-through selling will expose 86.14, the low of January 24, followed by 85.85, the low of January 10.