Insights 
VT 
USD/INR ended Monday slightly lower, near 88.00, amid firm US Dollar trading due to easing US-China trade tensions. With Indian markets closed for Diwali and Balipratipada, traders await the awaited US CPI data on Friday to gauge the Federal Reserve’s monetary policy plans.
President Trump criticised India for its oil purchases from Russia, suggesting higher tariffs unless it halts these transactions. The CPI data could shape expectations on US interest rates, as seen through the CME FedWatch tool, indicating potential rate cuts this year.
Key Resistance And Support Levels
USD/INR faces a key resistance at the 50-day EMA near 88.13, with the RSI nearing a critical level of 40.00. Support levels lie at 87.07 and 86.55, while barriers are at the 20-day EMA at 88.50 and the all-time high around 89.10.
India’s economy averaged a 6.13% growth from 2006 to 2023, attracting foreign investments boosting Rupee demand. Oil imports affect INR, as higher oil prices increase USD demand. Inflation alters INR’s value, influencing RBI’s interest rate decisions, affecting Rupee strength.
Trade deficits have led to stronger USD demand, occasionally weakening INR. High market volatility also boosts USD demand, impacting the Rupee.
Market Analysis And Inflation Discussion
With Indian markets closed for Diwali festivities today and tomorrow, we are seeing the USD/INR pair holding steady near the 88.00 level. This pause gives us time to assess the key factors that will drive currency movements in the coming weeks. The quiet domestic market contrasts with building anticipation for major economic data from the United States.
The most significant event this week will be the US Consumer Price Index (CPI) report due on Friday. We’ve seen US inflation remain stubborn in 2025, with September’s year-over-year number coming in at 3.4%, which has kept the Federal Reserve from signaling a clear path to rate cuts. This upcoming data point will therefore be critical in shaping expectations for the Fed’s final policy meetings of the year.
On the home front, pressure on the Rupee continues due to ongoing geopolitical tensions. The US administration remains critical of India’s significant oil purchases from Russia, which have consistently accounted for over 35% of India’s crude imports throughout 2025. These unresolved trade frictions create an uncertain outlook and potential for sudden volatility for the Rupee.
From a technical standpoint, the pair faces an immediate hurdle at the 50-day Exponential Moving Average around 88.13. The Relative Strength Index (RSI) is hovering near 40.00. A sustained drop below this level could signal fresh bearish momentum, and traders should watch this indicator closely.
This suggests that options traders might consider strategies that benefit from range-bound movement or a potential breakdown. Key support levels to watch are the August 21 low of 87.07 and the July low of 86.55. On the upside, any move higher would have to clear the 20-day EMA near 88.50 before targeting the all-time high around 89.10.
The price of oil remains a direct threat to the Rupee’s strength, as India is a major importer. We’ve seen Brent crude prices climb back above $90 per barrel in recent weeks, increasing the demand for US Dollars from Indian importers to pay for these essential energy supplies. This dynamic naturally weighs on the INR.
At the same time, we are watching the Reserve Bank of India’s stance on inflation. While the RBI’s benchmark repo rate of 6.75% should theoretically support the Rupee, the central bank is primarily focused on controlling domestic price pressures. We remember how the Rupee depreciated past 83 for the first time in late 2022 when the Fed’s aggressive rate hikes began, showing how sensitive our currency is to global interest rate differentials.
India’s persistent trade deficit also means there is consistent underlying demand for the US Dollar for import payments. When global markets become volatile, as they have been for much of 2025, foreign investment flows can become unreliable. This leaves the Rupee more exposed to being sold off to meet dollar demand from importers.
