USD/INR ticks up despite US Dollar drop in the aftermath of US NFP report

• The Indian Rupee edges lower against the US Dollar, even though the Greenback trades weak.
• The US NFP report showed a sharp slowdown in private sector hiring.
• India and the US are close to striking a trade agreement before the July 9 tariff deadline.

The Indian Rupee (INR) trades slightly lower at open against the US Dollar (USD) on Friday. The USD/INR pair ticks up to near 85.56 even as the US Dollar (USD) resumes its downside journey in the aftermath of the United States (US) Nonfarm Payrolls (NFP) report for June, released on Thursday.

At the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slid slightly below 97.00. Meanwhile, US markets will remain closed on Friday on account of Independence Day.

The USD Index attracted bids on Thursday after the US NFP report showed a higher-than-projected addition of workers. US employers hired 147K job-seekers, significantly higher than estimates of 110K and almost flat around May’s reading of 144K, which were revised slightly higher.

However, the report showed that workers added in the private sector were mere 74K, almost half of 137K recorded in May and way below if compared to the three-month average of 115K. According to the data, higher job numbers arrived due to robust hiring in the public sector, which added 73K workers against 7K in May.

The NFP report clearly reflects that the private sector is refraining from adding new workers amid uncertainty surrounding the tariff policy imposed by President Donald Trump after his return to the White House.

This week, Nela Richardson, chief economist at ADP, also stated that a “hesitancy to hire” and a “reluctance to replace departing workers” led to job losses last month. Her comments came after the ADP reported on Wednesday that private businesses laidoff 33K employees in June.

Deteriorating labor market conditions are unlikely to allow Federal Reserve (Fed) officials to take more time to assess the impact of Trump’s tariff policy on inflation. Lately, a few Fed policymakers have argued in favor of lowering interest rates sooner to support the labor market.

"The Fed should not wait for the job market to crash in order to cut rates," Fed Governor Christopher Waller said in an interview around the last week of June.

Daily digest market movers: Indian Rupee ticks lower against US Dollar

• The Indian Rupee edges down against the US Dollar in the opening session on Friday. While the outlook of the Indian currency has strengthened as the US and India are expected to strike a trade agreement before the expiration of the tariff deadline on July 9.
• A report from the NDTV showed on Thursday that India and the US can announce a trade agreement within "48 hours". The report also highlighted that both nations aim to bring overall duty barriers down to promote a healthy competitive environment. However, New Delhi aims to safeguard its agriculture sector and labor-intensive companies, such as leather, footwear, and clothes from getting exposed to competition from US companies.
• The comments from US President Trump on Wednesday also indicated that the deal will allow US companies to compete in India. “I think we are going to have a deal with India. And that is going to be a different kind of a deal. It is going to be a deal where we are able to go in and compete. Right now, India does not accept anybody in. I think India is going to do that, and if they do that, we are going to have a deal for much lower tariffs,” Trump said, ANI News reported.
• Meanwhile, Indian bourses continue to face sell-off from Foreign Institutional Investors, which are expected to have been lightening their positions ahead of the July 9 tariff deadline. FIIs have been sellers in the first trading days of July and have sold Rs. 5012.95 crores worth of equities.
• At open, both Nifty and Sensex trade cautiously as investors await developments on trade negotiations between the US and its trading partners. At the time of writing, Nifty50 trades flat around 25,400, and Sensex30 wobbles near 83,300.
• Ahead of the tariff deadline, US President Trump has stated that he will send letters to those nations with whom a trade agreement has not been finalized, outlining additional import duty rates.

Technical Analysis: USD/INR stays below 20-day EMA

The USD/INR pair oscillates well inside Thursday’s trading range at open on Friday. The pair faced a sharp selling pressure on Thursday after breaking below the tight range formed between 85.56 and 86.00 in the June 30-July 2 period.

The near-term trend of the pair remains bearish as it stays below the 20-day Exponential Moving Average (EMA), which trades around 85.70.

The 14-day Relative Strength Index (RSI) stays below 50.00, indicating that the trend is on the downside.

Looking down, the May 27 low of 85.10 will act as key support for the major. On the upside, Wednesday’s high of 86.13 will be a critical hurdle for the pair.