The global optimism over vaccine rollout and hopes of additional US fiscal stimulus has kept the USDINR spot in its descending trend. The spot breached 72.57, its lowest level since Mar 3, 2020 and is trading below the psychological level of 73.00, but will it lose this steam after the Fed minutes? At the December policy, the Federal Reserve kept its easy monetary policy in place to continue supporting economic growth. Overall US economy still faces hurdles but now vaccine is promising better days ahead. Also, President Biden is striving hard to pass the $1.9 trillion stimulus, which will offer another boost to a recovering economy. The fears that more fiscal stimulus will create an inflationary pressure has led a sharp increase in US yields. But Powell in his recent speech at the Economic Club of New York, distinctly expressed dovishness and said that the Fed would not consider raising interest rates even if inflation exceeds 2% on a temporary basis. If the same expression is reflected by all the FOMC members then we may see bearishness to continue in USDINR spot. Thus, traders will closely look at Fed's deliberations at the January meeting with the release of minutes.
Another barometer for the health of American consumer demand is retail sales, which is also due later today. Reuters poll expect the January retail sales to have increased by 1.1% compared to -0.7% in December. The aspect of dollar is tied to the health of US economy, so an upbeat retail sales may push the USDINR spot higher. But the uptrend will be limited as traders need proof that the economy is getting in better condition.
Technically, as seen in the daily chart below, currently USDINR Spot respected the key 72.95 mark and is trading below the same. The immediate key support lies at 72.75/72.70 (61.8% Fibonacci Retracement level) and consistent trading only below that, will open doors for 72.50-72.40. However, likely RBI intervention is to be watched out near 72.60/72.50. On the upside, breach of 73.00 mark and the consistent trading above that, will lead USDINR spot towards 73.15-73.20 (50 days Moving Average) zone.
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