The Indian Rupee (INR) opens flat against the US Dollar (USD) on Wednesday, with the USD/INR pair wobbling near 96.00. The Indian currency has drawn temporary support from consistent Reserve Bank of India’s (RBI) intervention through spot and Non-Deliverable Forwards (NDFs) markets and a drop in oil prices.
In the opening session, the MCX Crude Oil contract expiring on October 19 is down 0.45% to near Rs. 8,635.
Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, get some relief when oil prices start correcting.
Oil prices drop amid an increase in flows from Saudi Arabia
Analysts at Deutsche Bank note that the earlier surge in Brent was tempered after “Saudi Arabia has restored about half the flows through its East-West pipeline.” Goldman Sachs also said in a note that it estimates Persian Gulf oil exports, including dark exports, to have recovered to their 2025 average after doubling in September.
However, experts also question the correction in oil prices and warn of upside risks even beyond 2026, citing dashed hopes of near-term United States (US)-Iran diplomacy.
Deutsche Bank argues that persistent “scepticism about the Strait of Hormuz reopening any time soon has led investors to price a longer period of high prices into next year.”
Meanwhile, a report from Axios has shown that efforts this week by Qatari mediators to broker a diplomatic breakthrough between the US and Iran have made little progress, with neither side willing to budge. Such a scenario could allow oil prices to resume their upside.
US PCE Inflation data awaited
Later in the day, investors will pay close attention to the US Personal Consumption Expenditures (PCE) Price Index data for August, which will be published at 12:30 GMT. The core PCE inflation, which is the Federal Reserve’s (Fed) preferred inflation gauge, is expected to have remained steady at 3.3% Year-on-Year (YoY), with monthly figures growing at a faster pace of 0.3% against the previous reading of 0.2%.
The data is expected to have a significant influence on the Fed’s interest rate expectations. Currently, financial markets are confident that the Fed will continue its monetary tightening cycle to contain high inflation risks due to energy supply bottlenecks and strong Artificial Intelligence (AI)-led demand.
The Fed started the interest rate hike cycle in the September policy meeting, where it raised key rates by 25 basis points (bps) to the 3.75%-4.00% range.
Analysts at MUFG/BTMU highlight that, after delivering its first hike this month, the US rate market now expects the Fed to deliver "almost another 100bps of rate hikes in the year ahead."
This week, the major trigger for the Fed’s interest rate projections will be the Nonfarm Payrolls (NFP) data for September, which will be released on Friday.
USD/INR Technical Analysis
In the daily chart, USD/INR trades at 95.9755, holding above the 20-period exponential moving average (EMA) at 95.6996, which underpins a mildly bullish near-term bias. The pair has been grinding higher over recent sessions, and the Relative Strength Index (RSI) at 59.8 stays in positive territory without yet signaling overbought conditions, suggesting room for the uptrend to extend while dips remain supported by the nearby EMA.
On the downside, initial support is located at the 20-period EMA around 95.70, where buyers are likely to defend the prevailing uptrend on any pullback. With no clear technical resistance levels immediately overhead in this dataset, price action could continue to probe higher until a new structural barrier forms, while a daily close below the 20-period EMA would hint at waning bullish momentum and a deeper corrective phase.
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