Can India's forex reserves decline pressure EUR/INR?

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Euro vs Indian Rupee down 0.49% today

Highlights

India's foreign exchange reserves dropped by $4.924 billion to $780.782 billion for the week ending September 11.
Foreign currency assets fell $2.372 billion and gold reserves declined $2.591 billion, raising liquidity concerns for Indian markets.
EUR/INR continues to face bearish pressure with low probability of an upward move and is expected to trade in the ₹108.7551 to ₹109.8481 range.

Shrinking reserves drive rupee volatility amid liquidity pressures

India's foreign exchange reserves fell by $4.924 billion to $780.782 billion in the week ended September 11, with a $2.372 billion decline in foreign currency assets and a $2.591 billion decrease in gold reserves, according to Business Standard. The shrinking reserves point to increased foreign currency outflows and ongoing adjustments in the central bank's portfolio, which can add liquidity pressures in the broader Indian financial market. These dynamics may influence cross-currency flows and periodic volatility in the EUR/INR pair, as changes in reserve buffers can affect short-term demand for both the rupee and the euro.

Bearish momentum persists with oversold signals and resistance cap

Turning to technicals, EUR/INR is below the MA-20 and MA-50 on the H1 timeframe as well as below the MA-200 on the daily chart, highlighting ongoing bearish pressure across all major timeframes. The Ichimoku Kijun level at ₹109.6265 acts as immediate resistance. Momentum indicators remain weak: both MACD and ADX point to a continued sell bias, while RSI, Stoch RSI, and CCI have entered oversold territory, suggesting a possible technical rebound. Bull/Bear Power indicates sellers remain in control intraday, and the Awesome Oscillator confirms the persistent downward movement.

Further downside risk persists as breakout chances remain slim

Over the next two to three days, EUR/INR is expected to trade within a narrow volatility band between ₹108.7551 and ₹109.8481. The probability of an upward breakout is very low, whereas the risk of further declines remains high. The baseline scenario favors consolidation with limited directional movement. If the price surpasses resistance at ₹109.6265, a bullish scenario could emerge, while a breakdown below support at ₹108.7551 would likely trigger renewed downside momentum.

Anton Kharitonov, analyst at Traders Union, sees EUR/INR trading as pressured by both fundamental and technical factors. He notes declining Indian FX reserves as a risk, which could keep liquidity tight and limit rupee support. Technical signals remain bearish across all timeframes, with weak momentum and oversold readings suggesting limited room for a rebound. "Base case remains for consolidation between ₹108.7551 and ₹109.8481 — until resistance at ₹109.6265 breaks, there is no reason to expect a sustainable recovery."

Earlier, analysts noted that Euro vs Indian Rupee was under short-term bearish pressure despite a broadly stable long-term outlook. The current analysis reinforces this view with sustained downside momentum, highlighting that a decisive move below ₹108.7551 could accelerate further losses in the days ahead.

Source of Data: EUR 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.