USD/INR declines after mixed Indian PMI data

• The Indian Rupee rebounds in Friday’s early European session.
• HSBC India Manufacturing PMI rose to 58.0 in January vs. 56.4 prior; Services PMI eased during the same reported period.
• The routine RBI intervention and lower crude oil prices could support the INR. 
• The US January S&P PMI data will be the highlight later on Friday. 

The Indian Rupee (INR) trades in positive territory on Friday. The latest data released on Friday showed that the HSBC India Manufacturing Purchasing Managers Index (PMI) improved to 58.0 in January from 56.4 in December. Additionally, the Indian Services PMI eased to 56.8 in January versus 59.3 prior. The Composite PMI declined to 57.9 in January from 59.2 in December. The local currency remains strong in an immediate reaction to the mixed PMI data.

A fall in crude oil prices could provide some support to the INR as India is the world's third-largest oil consumer. Additionally, the Reserve Bank of India (RBI) allowed the Indian Rupee to move both ways with minimal intervention. This, in turn, might help limit the INR’s losses.

However, increased US Dollar (USD) demand from foreign banks operating in India, foreign portfolio outflows from Indian equities and the uncertainty surrounding tariff announcements by US President Donald Trump weigh on the local currency.  Investors will keep an eye on the preliminary reading of US S&P PMI for January, which is due later on Friday.

Indian Rupee recovers amid President Trump’s demands

• “India’s manufacturing sector started the year strong, with output and new orders bouncing back from a relatively weak third fiscal quarter. The rise in new export orders was especially noticeable, and the easing of input cost inflation is also good news for manufacturers," said Pranjul Bhandari, chief India economist at HSBC.
• Moody's Ratings on Thursday noted the Indian Rupee has depreciated by around 5% in the last two years and has fallen by 20% in the last five years, making it one of the weakest-performing currencies in South and Southeast Asia.
• Attributing the fall in the Indian rupee solely to the US dollar getting stronger, said former RBI Governor Raghuram Rajan. He added that any intervention by the Indian central bank on this could end up harming Indian exports, even as he urged policymakers to focus on creating more jobs and boosting household consumption.
• Trump stated at the World Economic Forum in Davos, Switzerland, that he would ask Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) to lower the price of oil.  
• "With oil prices going down, I'll demand that interest rates drop immediately, and likewise they should be dropping all over the world," said Trump.
• The US Initial Jobless Claims for the week ending January 18 rose to 223K, compared to 217K in the previous week, according to the US Department of Labor (DoL) on Thursday. This reading came in above the market consensus of 220K. 
• Continuing Jobless Claims increased 46K to 1.899M for the week ending January 11. 

USD/INR’s uptrend remains uninterrupted

The Indian Rupee trades on a softer note on the day. The positive view of the USD/INR pair remains in place, with the price holding above the ascending trend line and the key 100-day Exponential Moving Average (EMA) on the daily chart. The path of least resistance is to the upside as the 14-day Relative Strength Index (RSI) stands above the midline near 66.70. 

The all-time high of 86.69 acts as an immediate resistance level for USD/INR. Any follow-through buying above the mentioned level could draw in some buyers to the 87.00 psychological mark.

On the bearish side, the initial support level is seen at 86.18, the low of January 20. A breach of this level could see the next downside target at 85.85, the low of January 10, followed by 85.65, the low of January 7.