USD/INR flat lines as likely RBI intervention caps losses

• The Indian Rupee trades flat in Friday’s Asian session.
• USD demand from foreign banks might weigh on the INR, but the RBI’s intervention could help limit its losses. 
• The US housing data and Industrial Production for December are due later on Friday. 

The Indian Rupee (INR) steadies on Friday. The likely intervention from the Reserve Bank of India (RBI) to sell the US Dollar (USD) via state-run banks helps contain excess losses. Nonetheless, the USD bids from importers and foreign banks, particularly oil companies, could weigh on the local currency. Additionally, the geopolitical uncertainties and potential US trade tariffs by US President-elect Donald Trump could undermine the INR in the near term. 

Looking ahead, traders brace for the US housing data for December later on Friday, including Building Permits and Housing Starts. Also, the US Industrial Production will be published. 

Indian Rupee holds steady amid importer demand

• "Most foreign banks were buying dollars, while the RBI sold dollars to cap depreciation near 86.50/$1 levels, after which some more depreciation was seen up to 86.55/$1," said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
• India's trade deficit narrowed to $21.94 billion in December from $37.84 billion in November, owing to a significant decline in gold and oil import bills, according to the Ministry of Commerce and Industry on Wednesday.
• US Retail Sales rose by 0.4% MoM in December versus a 0.8% increase prior (revised from 0.7%), according to the US Census Bureau on Thursday. This reading was weaker than the market expectations of a 0.6% rise. 
• The US Initial Jobless Claims rose to 217K for the week ending January 10, compared to the previous week's tally of 203K (revised from 201K). This reading came in above the market consensus of 210K. 
• Fed Governor Christopher Waller said on Thursday that the US central bank could cut the interest rates multiple times this year if inflation eases as he is expecting. 
• Fed Chicago President Austan Goolsbee noted that he becomes more comfortable that the labor market is stabilising, per Reuters.  

USD/INR keeps the constructive bias, overbought RSI warrants caution for bulls in the short term

The Indian Rupee trades on a flat note on the day. The path of least resistance is to the upside as the USD/INR pair has formed higher highs and higher lows while holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) reaches overbought territory beyond the 70.00 mark, potentially signalling a temporary weakness or further consolidation in the near term. 

In the bullish case, the immediate resistance level emerges at an all-time high of 86.69. A decisive break above the mentioned level potentially draws in some buyers to the 87.00 psychological level. 

If bearish momentum continues, the pair might see a drop to 86.30, the low of January 15. Further south, the next downside target to watch is 85.85, the low of January 10, followed by 85.65, the low of January 7.