USD/INR fails to recover beyond 10-day SMA amid cautious optimism in Asia

Following its failure to provide a daily closing beyond 10-day SMA, USD/INR drops to 71.66 while heading into the European open on Monday.

The quote seems to have been witnessing downside pressure from the cautious optimism surrounding the Asian markets. The reason could be trade positive comments from the United States’ (US) President Donald Trump and pro-Democracy candidates leading in Hong Kong’s early election results. Also, China's recently announced penalties for intellectual property rights (IPR) theft improves Beijing's impression while talking trade with the US.

Even so, Reuters’ story that officials from the US and China doubt phase two of the trade talks considering uncertainty surrounding the initial negotiations weigh on the market’s risk tone. It should also be noted that the present Hong Kong government might not respect the victory of the latest protesters, which in turn could push the Trump administration to move forward in their Hong Kong Bill and escalate political tension with China.

That said, the equity markets in Asia, as indicates by MSCI’s index of Asia Pacific shares (ex-Japan), seesaw around 0.75% gains while Japan’s NIKKEI marks near to 0.70% as profits. Further, India’s BSE SENSEX is also on the positive side surrounding 40,600 while 10-year yields of the US and Indian government bonds seesaw around 1.77% and 6.48% respectively.

Looking forward, investors have little data/events scheduled for publishing on the economic calendar while the US Chicago Fed National Activity Index for October and Dallas Fed Manufacturing Business Index for November can please momentum traders afterward. Forecasts suggest a mild recovery in the Chicago figure to confront likely further contraction in the Dallas Fed reading.

Technical Analysis

Not only the 10-day Simple Moving Average (SMA) level of 71.83 but a week-long falling trend line around 72.00 could also keep prices under check. On the contrary, sellers targeting 71.00 will look for entry below 21-day SMA level of 71.38.