USD/INR: Mildly positive as US-China row confronts Indian government measures

With the mixed sentiment surrounding the US-China deal keeping the USD on the front-foot, USD/INR finds it hard to extend gains following the Indian government measures. The pair stays mildly bid while taking rounds to 71.82 ahead of the European session on Thursday.

On Wednesday, Indian Cabinet announced steps to divest five Public Sector Undertakings (PSUs) while also taking measures, like a two-year moratorium, for telecom companies. In addition to the Cabinet’s actions, Securities and Exchange Board of India (SEBI) released notifications that could positively affect market investments and solve trading problems.

Earlier in the month, the government stayed ready to hold the fiscal deficit target unchanged despite global rating agency Moody’s cutting down its growth forecast of the Indian economy. Also on the positive side could Mint’s Emerging Markets Tracker that recently put India to the second, after Philippines, in the list of 10 large emerging markets.

Trade tussle between the United States (US) and China kept taking a toll on the market’s risk tone. However, recently mixed notes from Chinese Vice Premier Liu He and Hong Kong Government seem to stop traders for further clues. The US-China row flared recently after the US House of Representatives passed the Hong Kong Human Rights Bill.

With this, the US 10-year treasury yields remain soft around 1.73% while that of Indian 10-year government bonds seesaw around 6.45%. Further, Asian stocks keep the red with Hong Kong’s HANG SENG continues to be the biggest loser.

Given the absence of major data, investors will keep an eye over the trade/political headlines for fresh impulse.

Technical Analysis

Prices need a successful break of 72.37/38 to regain its strength to challenge yearly high near 72.65, else a gradual pullback to 70.37/36 horizontal support can’t be denied.