USD/INR drifts higher, all eyes are on the Indian WPI inflation, US CPI data

• Indian Rupee loses traction in the Diwali Balipratipada holiday in India.
• India’s Inflation eased in October, closer to the central bank's target of 4%.
• The US Consumer Price Index (CPI) and India’s Wholesale Price Index (WPI) inflation data will be the highlight this week.

Indian Rupee (INR) edges lower on Tuesday as traders avoid taking large positions on the occasion of the Diwali Balipratipada holiday. Inflation in India slowed down for the third consecutive month in October, edging closer to the central bank's medium-term target of 4%. However, the country is particularly vulnerable to higher crude prices as India is the world's third-biggest oil consumer.

Investors will closely monitor the US Consumer Price Index (CPI) data due on Tuesday. The headline CPI is expected to rise by 0.1% MoM in October, while the core CPI is forecasted to climb by 0.3% MoM and 4.1% YoY. Furthermore, India’s Wholesale Price Index (WPI) Inflation YoY will also be released. The volatility in the market might trigger an intervention from the Reserve Bank of India (RBI) to protect the national currency.

Daily Digest Market Movers: Indian Rupee remains vulnerable to global factors

• India’s Consumer Price Index (CPI) rose 4.87% YoY in October from 5.02% in September, above the market expectation of 4.80%.
• The Reserve Bank of India (RBI) has kept the interest rates unchanged for four straight meetings while maintaining a relatively hawkish policy stance to alleviate price pressures.
• RBI Governor Shaktikanta Das said India remains vulnerable to food price shocks, and monetary policy is still influencing inflation towards the 4% target.
• RBI estimates that India's GDP will expand at a 6.3% annual rate in the current fiscal year.
• Controlling food prices and inflation is a top priority for Prime Minister Narendra Modi and his government as the election season gets closer.
• The New York Fed’s survey of consumer expectations showed the 1-year and 5-year inflation outlook eased to 3.57% and 2.72%, respectively.
• The US government reported a $66 billion budget deficit in October, compared to a deficit of $87 billion during the same month of last year.
• The University of Michigan's Consumer Sentiment Index dropped to 60.4 in November versus 63.8 prior, below the market consensus of 63.7.
• The UoM 12-month inflation expectations climbed to 4.4% from 4.2%, while the 5-year expectations rose to 3.2% from 3.0%.
• Fed Chair Jerome Powell reiterated that the Fed will hike rates again if deemed necessary to control inflation.

Technical Analysis: Indian Rupee keeps the bearish outlook unchanged

The Indian Rupee trades soft on the day. The USD/INR pair trades in a familiar range of 83.00–83.35 since September. The USD/INR bullish potential remains intact as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.

The first upside barrier of the pair will emerge near the upper boundary of the trading range of 83.35. Any follow-through buying will pave the way to the year-to-date (YTD) high of 83.47. Further north, the next upside stop to watch is a psychological round figure at 84.00. On the flip side, 83.00 acts as a key contention level. A decisive break below 83.00 will see losses extend to a low of September 12 at 82.82, followed by a low of August 4 at 82.65.