USD/INR: Modestly lower below 71.50 with eyes on economic calendar

• USD/INR struggles to justify mixed catalysts at home amid coronavirus fears.
• Updates from global rating giants, IMF fails to provide any clear direction to the Indian traders.
• Indian WPI inflation, US Retail Sales and Consumer Sentiment are in the spotlight.

USD/INR trades near 71.30 as the Indian markets open for Friday’s trading. The quote rose the previous day amid fears of coronavirus while paid a little heed to S&P’s no change in Indian credit rating.

A sudden spurt in coronavirus cases, due to a change in methodology for diagnosis, triggered risk-off on Thursday. The moves are settling since then as the latest numbers Hubei, which declined from Wednesday’s 14,840 to 4,823, signal consolidation.

Also doubting the pair’s upside momentum is comments from S&P. The global rating giant affirmed India’s rating at BBB-/A-3 while keeping the outlook stable on Thursday. That contradicts comments from Moody’s that termed the Reserve Bank of India's (RBI) recent asset recognition norms as credit negative for Indian banks. Further, Fitch recently said that the ASEAN coronavirus risks hinge on duration and policy response.

Additionally, Gerry Rice, communications director of the International Monetary Fund (IMF) also showed concern for the weakness of the Indian economy while advising more ambitious structural and financial sector reforms.

That said, market risk-tone seems to recovery from the previous day’s declines. The US 10-year treasury yields stay mostly unchanged around 1.60% whereas shares in Asia have started posting minor gains.

Traders will now turn to the Indian WPI Inflation data for January, up for publishing at 06:30 GMT, expected 2.92% versus 2.59% prior. Following that, the US Retail Sales and the preliminary reading of Michigan Consumer Sentiment Index will direct market moves. While the US Retail Sales are expected to soften by 0.30% from 0.50% whereas the sentiment gauge could also step back from 9.8 to 99.5.

Technical Analysis

FXStreet Analyst Flavio Tosti holds a bearish bias while citing the bearish flag pattern:

USD/INR broke below a bear flag pattern challenged the 71.20 support level and then retested the 71.60 resistance. Since then, USD/INR entred e tight range while remaining weak below the 71.60/72.00 resistance zone. However, a daily close above the 72.00 figure could invalidate the bearish scenario and generate further upside towards the 72.40 level.