Indian Rupee extends gains as US midterm elections weigh on US Dollar

• US Dollar underperformance allows the Indian Rupee to extend its gains.
• A Senate majority goes to the Democrats, who also lead in the House vote.
• ING does not view the Democrats' victory as a source of structural US Dollar weakness.

Early results from the United States (US) midterm elections suggest that Democrats are on course to win both the House and the Senate, as the Indian Rupee (INR) strengthens further against the US Dollar (USD) on Wednesday.

A weaker US Dollar leaves USD/INR 0.1% lower at around 94.60 in opening trading. At the time of writing, the US Dollar Index (DXY), which measures the Greenback against six major currencies, is down 0.4% at roughly 101.48. Although the DXY has recouped a sizeable portion of its intraday losses after falling to around 101.25, it remains sharply lower.

Democrats secure Senate majority and lead in House count

With counting still under way, the BBC reports that Democrats have secured 50 seats, giving them a majority in the Senate. Results have been counted for 294 of the House's 435 seats, with Democrats ahead on 184 seats. A party requires 218 seats to secure an outright majority.

A Democratic victory in both the House of Representatives and the Senate is expected to affect the US Dollar significantly.

In an earlier warning, ING said that “fears of tougher regulation could weigh on Artificial Intelligence (AI) stocks (we’ve recently seen how that can hit the greenback), while markets could price in greater risks of decision-making gridlock around issues such as government funding and the debt ceiling.”

Nevertheless, ING dismissed concerns about a structural change in the Dollar's direction. The bank explained that the greenback “continues to respond predominantly to the Fed story, which shouldn’t face an immediate and direct impact from the midterm result”.

US jobs releases take centre stage

Among this week's major US economic releases, investors will be watching October's Nonfarm Payrolls (NFP) report particularly closely when it is published on Friday. The figures are likely to have a substantial bearing on expectations for Federal Reserve (Fed) interest rates.

Before the official US employment report, markets will turn to October's US ADP Employment Change figures, due later in the day at 13:15 GMT. Expectations are for private-sector job creation of 69K, down from 90K in September.

USD/INR Remains Under Pressure Below Its 20-Day EMA

Trading at 94.7405 on the daily chart, USD/INR retains a bearish short-term outlook while spot remains below the 20-day exponential moving average (EMA) at 95.1559. Following a pullback from recent highs, the pair continues to face a ceiling at this dynamic resistance. A Relative Strength Index (RSI) reading of around 37 points to persistent downward pressure, although it has not yet reached oversold territory.

The 20-day EMA, near 95.16, provides the first resistance on the upside. A daily close above it would be required to temper the current bearish bias and open the way for a recovery. As the available dataset identifies no clear structural support levels, traders may consider recent swing lows and round-number levels below the current price as possible areas of demand. The overall technical set-up nevertheless favours sellers while the pair stays below the 20-day EMA.

(The technical analysis of this story was written with the help of an AI tool. Know more.)