USD/INR logs in four-day losing streak amid ray of optimism from India

• USD/INR stays on the back foot for four consecutive days amid US-China trade pessimism.
• Optimism surrounding Indian trade relations with the rest of the world, expected an increase in investments in favors the Indian rupee (INR).
• Second-tier data on the economic calendar, trade/political headlines will offer fresh direction.

USD/INR weakens for the fourth day in a row as recent government measures from India, coupled with fresh trade/investment news, keep the Asian currency on the front foot. With this, the quote drops to 71.70 while heading into the European session on Friday.

In contrast to the trade differences between the United States (US) and China, the US-India trade relations are likely to improve as both the parties recently agreed on equitable market access for trade deal in recent days. Additionally, increased investments from global bond champions like Advent international, coupled with the hope for further government measures, as it did in recent days, favor the INR.

The underlying reason could also be the global trust in the Prime Minister (PM) Narendra Modi after securing a huge victory in the general election and building strong international ties. In this regard, CIBC says, “the re-election of the Modi government this year saw investor confidence in the potential of the economy and in the administration’s attempt at reform to become somewhat stilted. Nevertheless, we’re optimistic about economic potential, despite the difficulty of tapping into the economy’s resources and the number of unsuccessful attempts at reform thus far. We look for INR to remain a buy-weakness story, rather than chasing the market higher.”

While traders await fresh clues on the US-China tussle, the dragon nation’s military urges the US to stop provocative acts in the South China Sea after the US Navy earlier mentioned of two ships took rounds as a mark of “Freedom of Navigation.” Both the nations are at loggerheads after the US Congress passed Hong Kong Bill while calls of the US to delay December 15 tariff hike and China’s trade-talk invitation keep investors guessing.

It’s worth mentioning that Asian stocks and the US 10-year Treasury yields seesaw near Thursday’s close amid a lack of major catalysts.

Moving on, India’s Forex Reserve and Bank Loan Growth might not gain major attention amid traders’ wait for US-China story. However, activity numbers and consumer sentiment data from the US could keep market-watchers entertained during the rest of the day.

Technical Analysis

21-day Exponential Moving Average (EMA) and November 12 low highlight 71.50 as near-term key support ahead of 71.30 and 71.00. Alternatively, 72.38/40 and 72.65/70 could continue challenging buyers.