USD/INR ignores Indian worries, registers four-day drop to monthly low under 71.00

USD/INR declines to 70.85, after refreshing the monthly lows to 70.68, as the Indian markets open for Monday’s trading session.

The pair might have cheerer upbeat Indian Industrial Production numbers, published Friday while the US-China trade optimism also favors the Indian rupee (INR) buyers. India’s Index of Industrial Production rose for the first time in three months to 1.8% MoM against a contraction of 3.8 percent in October. The US and Chinese leaders will sign on a phase-one trade deal on January 15 in Washington. The leaders are also expected to start discussing phase-two deal talks as well as re-start the semi-annual talks including broad eco-political issues.

It’s worth mentioning that weaker than expected jobs report from the US as well as receding risk of the US-Iran war also exert downside pressure on the pair.

While following the offshore optimism, the USD/INR pair traders show a little care for the steep drop in the government’s revenue. Reuters relied on sources while saying, “Indian government to seek Reserve Bank of India (RBI) dividend boost as revenue drops India's government plans to push the central bank for a fiscal lifeline in the form of another interim dividend, as it struggles to meet its expenditure commitments amid a steep revenue shortfall.”

Market’s risk tone seems mostly upbeat as the MSCI’s index of Asia-Pacific shares surges to fresh 19-month high whereas bourses in Japan are off due to the Coming-of-Age Day holiday.

Moving on, December month retail inflation data (CPI) will decorate the Indian economic calendar while the US data-line is mostly quiet. Hence, traders will keep eyes on trade/political headlines for fresh impulse.

Technical Analysis

Pair’s sustained break of 21-day SMA level of 71.30 signals further weakness towards 200-day SMA near 70.48.