The Indian Rupee (INR) opens slightly higher against the US Dollar (USD) on Friday. The USD/INR pair drops to near 95.26 due to broader underperformance in the US Dollar, following the release of the weak United States (US) Nonfarm Payrolls (NFP) data for June on Thursday.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower to near 100.78. On Thursday, the USD Index declined almost 0.6% from Wednesday’s closing price.
US NFP report shows moderate labor demand
The US NFP report showed that employers hired 57K fresh jobs in June, significantly lower than estimates of 110K. Also, the May data was revised lower to 129K from 172K. The Unemployment Rate dropped to 4.2% against the estimates and the previous reading of 4.3%.
Average Hourly Earnings, a key measure of wage growth, rose by 3.5% Year-on-Year (YoY), as expected, faster than the previous reading of 3.4%.
Signs of soft job demand have forced traders to reconsider hawkish Federal Reserve (Fed) interest rate expectations. Following the US official employment data release, the odds of the Fed delivering at least one interest rate hike in the September policy meeting have diminished to 53.2% from almost 64% seen on Wednesday, according to the CME FedWatch tool.
Considering the latest remarks from Fed officials that their majority priority is taming “high inflation”. On Wednesday, Fed Chair Kevin Warsh warned at the European Central Bank (ECB) Forum in Sintra that inflation remains “too high”, while stressing the need to bring price stability. As expected, Warsh didn’t offer any cues regarding the Fed’s future decisions on interest rates.
Oil prices stabilize near pre-Middle East war levels
The MCX Crude Oil contract expiring on July 20 appears to have stabilized in the 6,450-6,600 range after falling over 20% in June. Oil prices will likely remain near pre-Middle East war levels, as Qatar has touted “progress” in indirect talks between the US and Iran.
Lower oil prices bode well for currencies from economies, such as India that rely heavily on oil imports to meet their energy needs.
FIIs keep lowering stake in Indian stock market
Foreign Institutional Investors (FIIs) have remained net sellers in the first two trading days of July, offloading their stake worth Rs. 1.452.32 crore. However, the amount of selling has declined as oil prices have returned lower, with investors focusing on business updates from financial services and consumption companies of India Inc.
Technical Analysis: USD/INR holds Descending Triangle breakout
USD/INR trades at around 95.26, holding a modest bullish bias as it consolidates above the 20-day Exponential Moving Average (EMA) at roughly 94.93 and the breakout of the Descending Triangle formation.
The Relative Strength Index (RSI) at around 54 suggests mildly positive, but not overstretched, momentum.
On the downside, initial support is seen at the 20-day EMA near 94.933, reinforced by the reclaimed downward trend-line region around 94.764, with deeper protection at the structural support zone near 94.065. Looking down, the pair could extend its advance towards 96.00 if it continues to hold the Descending Triangle breakout.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
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