USD/INR edges higher as strengthening Oil prices weigh on Indian Rupee

• The Indian Rupee weakens ahead of economic figures from India due on Monday.
• Oil prices may lose ground amid rising oversupply concerns.
• The US Dollar may struggle as traders expect that the Fed will cut interest rates in September.

The Indian Rupee (INR) loses ground against the US Dollar (USD) on Monday after registering gains in the previous two sessions. The USD/INR pair appreciates probably as the higher crude Oil prices put downward pressure on the INR. It is important to note that India is one of the largest crude Oil importers in the world. Traders await a slew of economic figures from India on Monday, including Industrial Output, Manufacturing Output, and Trade Deficit.

West Texas Intermediate (WTI) Oil price is trading around $64.70 per barrel at the time of writing. However, the upside of the Crude Oil prices could be limited amid easing fears over supply disruptions, driven by the Middle East ceasefire. Moreover, OPEC+, the Organization of the Petroleum Exporting Countries and its allies, is set to boost production by 411,000 barrels per day in August, following a similar hike already planned for July.

The Indian Rupee gained ground due to strong foreign inflows. Foreign Institutional Investors (FIIs) bought Indian equities worth Rs 8,915 crore into Indian equities so far this June. Analysts note that this renewed interest reflects confidence in India's economic growth story and the market's underlying strength.

Daily digest market movers: Indian Rupee holds losses amid a stable US Dollar

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is trading higher at around 97.20 at the time of writing. US employment figures are scheduled to be released later in the week, which may further offer fresh impetus on the US Federal Reserve's (Fed) policy outlook.
• The US Nonfarm Payrolls report is expected to show the economy added 110,000 new jobs in June, down from 135,000 in May. The estimated range is currently between a high of 140,000 and a low of 75,000. Moreover, Unemployment is anticipated to tick higher to 4.3% from 4.2%.
• The US Dollar may struggle amid rising expectations of the Federal Reserve (Fed) cutting interest rates at the September meeting. Data showed on Friday that US Personal Spending unexpectedly fell in May, the second decline this year. Meanwhile, US Personal income dropped by 0.4% in May, the largest decrease since September 2021.
• US President Donald Trump may announce a successor for Federal Reserve (Fed) Chair Jerome Powell by September or October. Trump might consider former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett, according to the Wall Street Journal.
• Chicago Fed President Austan Goolsbee said on Thursday that the political waves are not a factor in decision-making, nor would the naming of a shadow chair, per CNBC.
• Fed Chair Jerome Powell noted on Wednesday that Trump's tariff policies may cause a one-time price hike, but they could also lead to more persistent inflation. The Fed should be careful in considering further rate cuts.
• Economists have projected a slightly slower Gross Domestic Product (GDP) growth in India for the current financial year ending in March at 6.4%, compared to 6.5% growth seen last year, according to a poll from Reuters. Economists have projected a slower growth despite the Reserve Bank of India (RBI) having front-loaded interest rate cuts.

Technical Analysis: USD/INR holds gains around 85.50

The USD/INR pair holds modest gains near 85.50 on Monday, falling below the nine-day Exponential Moving Average (EMA), suggesting a weaker short-term price momentum.

The 14-day Relative Strength Index (RSI) remains below the 50 mark, indicating a persistent bearish bias.

On the downside, the monthly low at 85.30 appears as the immediate support. Meanwhile, the nine-day EMA at 85.81 could act as the primary barrier.

USD/INR: Daily Chart