USD/INR finished Monday a bit lower, close to 88.00, as the US Dollar remained strong due to easing trade tensions between the US and China. With Indian markets closed for Diwali and Balipratipada, traders are now looking forward to the US CPI data coming out this Friday, which will help them understand the Federal Reserve’s plans for monetary policy. President Trump expressed his concerns about India purchasing oil from Russia, suggesting that higher tariffs could follow if these purchases continue. The upcoming CPI data may influence expectations regarding US interest rates, as indicated by the CME FedWatch tool, which shows potential for rate cuts later this year.

Key Resistance and Support Levels

USD/INR is facing a crucial resistance level at the 50-day EMA around 88.13. The RSI is approaching a key mark of 40.00. Support levels are set at 87.07 and 86.55, while resistance can be found at the 20-day EMA around 88.50 and the all-time high near 89.10. India’s economy has grown by an average of 6.13% from 2006 to 2023, attracting foreign investments that boost demand for the Rupee. Oil imports impact the Rupee, as higher oil prices lead to increased demand for USD. Inflation also plays a role in altering the Rupee’s value, which affects the RBI’s decisions on interest rates. Trade deficits have resulted in a higher demand for USD, which can sometimes weaken the INR. Increased market volatility also raises the demand for USD, further impacting the Rupee.

Market Analysis and Inflation Discussion

With Indian markets observing Diwali festivities today and tomorrow, the USD/INR pair is holding steady around the 88.00 mark. This pause allows us to evaluate the key factors that will influence currency movements in the upcoming weeks. The calm domestic market contrasts with the anticipation for significant economic data from the United States. The most important event this week is the US Consumer Price Index (CPI) report set for Friday. US inflation has remained stubborn in 2025, with the year-over-year figure for September at 3.4%. This has kept the Federal Reserve from providing a clear direction for rate cuts. This upcoming data will be important for shaping expectations for the Fed’s final policy discussions this year. Domestically, the Rupee faces pressure from ongoing geopolitical challenges. The US government continues to criticize India’s substantial oil purchases from Russia, which have consistently made up over 35% of India’s crude imports in 2025. These unresolved trade issues create uncertainty and possible volatility for the Rupee. From a technical perspective, the pair faces resistance at the 50-day Exponential Moving Average around 88.13. The Relative Strength Index (RSI) is currently near 40.00. If it drops below this, it may signal new bearish momentum, prompting traders to monitor this closely. This indicates that options traders might consider strategies to take advantage of a range-bound market or a potential breakdown. Key support levels to watch include the August 21 low of 87.07 and the July low of 86.55. On the higher end, any upward movement would need to surpass the 20-day EMA near 88.50 before aiming for the all-time high around 89.10. The price of oil poses a direct threat to the Rupee’s strength since India is a major importer. Recently, Brent crude prices have risen back above $90 per barrel, leading to increased demand for US Dollars from Indian importers for these essential energy supplies. This situation naturally affects the INR. At the same time, we are monitoring the Reserve Bank of India’s approach to inflation. Although the RBI’s benchmark repo rate stands at 6.75%, which should theoretically support the Rupee, the central bank is mainly focused on managing domestic price pressures. Recall how the Rupee fell below 83 for the first time in late 2022 when the Fed began aggressive rate hikes, highlighting how sensitive our currency is to global interest rate differences. India’s ongoing trade deficit also ensures a constant demand for the US Dollar for import payments. When global markets become volatile, as they have in much of 2025, the flow of foreign investments can become less reliable, making the Rupee more vulnerable to being sold off to meet dollar demand from importers. Create your live VT Markets account and start trading now.

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