Preview of Indian Manufacturing and Inflation Data: USDINR In Focus

On Monday, June 15, the WPI manufacturing and inflation data (year-over-year) for India will hit the markets at 6.30 am UTC. The consensus number for the manufacturing data piece is 0.34%, with inflation expected to come in at 1%, down from 1.05% recorded previously. 

These data will measure how the Indian economy has coped with the lockdowns imposed to contain the spread of the coronavirus pandemic within the 2nd largest country by population in the world. A research report from DBS Bank expects a contraction of 45% in manufacturing on an annualized basis, as lockdowns affect India’s vast manufacturing sector. The bank also expects a drop in WPI inflation to 5.6% on a year-over-year basis. 

The Indian Rupee (INR) is trading close to its all-time lows against the US Dollar, and a look at the weekly chart for the USDINR shows the pair trading within a bullish pennant pattern following the burst from the rectangle pattern seen between August 2019 and February 2020. 

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Outlook for the USDINR

If both data sets come out worse than expected, this could pressurize the Rupee further, allowing the pair to resolve the pennant consolidation in line with technical expectations. If this is the case, the USDINR may find breakout momentum from a bounce off the support zone formed by 74.491 acting as the ceiling, and 74.042 acting as the floor of this zone. Such a breakout could target 76.748 initially, with a price advance beyond this zone sending the USDINR towards new record highs. 

Conversely, an improvement in the manufacturing and inflation data could make a case for the pair to breakdown the pennant’s lower border, targeting the September 2018 weekly highs at 72.912. This move may get some strength if there is a prevailing risk-off market sentiment. Only a break of 72.912 would allow the pair to attain the previous resistance-turned-support level at 71.929. Further decline opens the door towards 70.377.

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