Why is the US dollar rising against the Indian rupee today? Higher Brent crude oil prices boost demand

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US Dollar vs Indian Rupee up 0.47%

Highlights

The Reserve Bank of India has executed USD/INR sell-buy swaps to absorb excess liquidity from the inter-bank system.
The Indian rupee remains under pressure due to higher Brent crude prices and sustained foreign equity outflows, raising US dollar demand.
USD/INR shows strong bullish momentum with price trading near the daily high at ₹95.5625, with an expected range of ₹95.0847 to ₹96.0403 and a very high probability of further upside.

RBI intervention tempers rupee as oil and outflows drive dollar demand

The Reserve Bank of India has conducted USD/INR sell-buy swaps to absorb excess liquidity from the inter-bank system, directly impacting short-term USD/INR supply-demand, according to Economictimes Indiatimes. This intervention comes as the Indian rupee has faced pressure from higher Brent crude oil prices and continued foreign equity outflows, both of which have increased demand for the US dollar. Additionally, the RBI's recent introduction of five new currency pairs on its FX-Retail platform, as reported by Bloomberg, broadens market participation and could gradually influence trading dynamics across the currency complex.

Technical divergence emerges with bullish signals and overbought risks

On the h1 timeframe, USD/INR is positioned above the MA-20 at ₹95.2658 and the MA-50 at ₹95.0833, while remaining well above the long-term MA-200 at ₹94.0693. The Ichimoku Kijun offers immediate support at ₹95.3444. Bullish signals are evident from indicators such as MACD and ADX, with the Awesome Oscillator also supporting upward momentum. However, RSI stands at a high 73.41, indicating overbought conditions alongside the CCI; in contrast, the Stochastic RSI signals a strong sell, highlighting a divergence and suggesting upside may be stretched. Bull/Bear Power readings continue to favor buyers during intraday trading.

Upside momentum seen strong unless support breach triggers retracement

Looking to the next trading day, USD/INR is expected to remain within a volatility band of ₹95.0847 to ₹96.0403. The probability of further upside movement is very high, but a move below support would open the door to a short-term retracement. The baseline scenario anticipates price action remaining contained within the projected range, with any breakout above resistance likely attracting additional bullish momentum.

Viktoras Karapetjanc, analyst at Traders Union, believes that the Reserve Bank of India's active liquidity management and new FX-Retail offerings highlight a supportive policy stance for INR markets. He notes that macro fundamentals, such as elevated oil prices and equity outflows, remain headwinds for the rupee in the short term. Technically, bullish momentum is clear, but overbought signals point to the potential for brief pullbacks. Karapetjanc sees scope for further USD/INR gains if current conditions persist. "As long as the RBI stays proactive and global headwinds remain, I expect upward momentum in USD/INR to continue within the current range."

Previously it was reported that the Reserve Bank of India's special USD-INR forex swap facility played a significant role in mobilizing foreign currency inflows through various channels. The latest market developments, including RBI's interventions and broadening of currency pair trading, add a new dimension and suggest that traders should closely monitor the ₹95.3444 support level for potential shifts in short-term USD/INR momentum.

Source of Data: USD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.