USD/INR breaks record imbalance as Indian importers "show attitude"

The pressure on INR continues to escalate as Thursday morning market updates show the USD/INR pair surpassing 90.20 — a hot level after the RBI intervened in the market yesterday. Although the Reserve Bank of India aggressively sold USD for the first time this year to curb excessive volatility, this effect seems to be short-lived.

The question is: Are Indian importers viewing the current price level as a golden opportunity to build long-term positions? USD demand has been continuously stimulated by tense trade relations between Washington and New Delhi since mid-2025, especially as the US sharply increased import tariffs to 50% related to Russian oil issues. This week, President Trump intensified pressure again, threatening to further raise tariffs if India does not change its stance on oil supply.

Foreign capital “fleeing” from the Indian stock market

This comprehensive trade pressure is directly impacting international investor sentiment. Data shows that Foreign Institutional Investors (FII) recorded net sales in the first 8 months of 2025. Just in January alone, international capital outflows amounted to 4,650.39 crore Rs, reflecting deep pessimism about India’s prospects.

USD strong after US services data “surprisingly optimistic”

The main driver for USD/INR’s continued rise is the strength of the US dollar. The DXY index is currently trading around 98.70 but spiked on Wednesday after the ISM announced December services PMI data that far exceeded expectations.

Specifically, the ISM reported December services PMI at 54.4 — significantly higher than the 52.6 in the previous month and above the forecast of 52.3. This is a positive signal indicating that the US services sector remains optimistic as 2025 ends. Additionally, sub-indicators such as Employment and New Orders also surpassed expectations.

However, dark clouds appear from other labor market data. US ADP figures for December showed only 41,000 new jobs added, below the forecast of 47,000. Moreover, JOLTS for November recorded 7.15 million new job openings, down from 7.6 million (expected) and 7.45 million (previously).

These signs could open the scenario for a Fed rate cut, which would put additional pressure on INR if it occurs. To clarify the trend, the market will focus on the upcoming NFP (Non-Farm Payrolls) report for December, expected to be released on Friday. The report is anticipated to show 60,000 new jobs, down from 64,000 in November, with the unemployment rate expected to decrease to 4.5%.

Technical analysis: USD/INR fluctuates wildly around the 20-day EMA

From a technical perspective, USD/INR is testing the support of the (EMA) 20-day moving average at 90.2025. This EMA level has started to turn downward, creating pressure for short-term recoveries. When the pair trades below this level, the short-term trend will weaken.

The 14-day RSI is at 49 (neutral zone), indicating that buying and selling momentum has lost clear direction. This suggests the market is in a consolidation phase before the next move.

Positive scenario: If USD/INR closes today above the 20-day EMA, it will re-activate buying momentum and open the way to the highest peak so far at 91.55.

Negative scenario: If it fails to break above the 20-day EMA, the pair risks falling to the December 19 low of 89.50, with a deeper correction possible if support at that level does not hold.

(Technical analysis supported by AI tools)