- USD/INR prints the first daily loss in four, retreats from 1.5-month high.
- Softer India inflation figures, Fed’s dovish hike allow RBI to defend current inaction.
- WTI crude oil retreat, downbeat US data and mixed Fedspeak allows Indian Rupee to regain upside momentum.
- US debt ceiling talks, Retail Sales in the spotlight for fresh impulse.
USD/INR holds lower ground near the intraday low of 82.20 as it snaps a three-day uptrend during early Tuesday. In doing so, the Indian Rupee (INR) cheers the broad US Dollar weakness, as well as benefits from easing pressure on the Indian central bank to act and a retreat in the crude oil price.
That said, US Dollar fails to cheer the downward shift in the market’s sentiment as the latest comments from United States House Speaker Kevin McCarthy saying, “I don’t think we’re in a good place,” seem to put a floor under the US Dollar price, via fears of deadlock on the US debt ceiling extension as Republicans may stick to their demand.
It’s worth noting that the US Dollar Index (DXY) drops to 102.40 as it keeps the week-start pullback from the monthly high even as the White House announced a meeting between President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy to overcome the looming US default.
The DXY’s latest weakness could be linked to Monday’s NY Empire State Manufacturing Index which marked the biggest fall since April 2020, to -31.8 for May. The same joins the downbeat signals from the US inflation numbers flashed the last week, as well as justifying the Federal Reserve’s (Fed) dovish hike.
On Monday, India’s WPI Inflation followed the suit of the Consumer Price Index (CPI) flashed in the last week and eased pressure from the Reserve Bank of India (RBI) to act, which in turn weighed on the USD/INR price. Also exerting downside pressure on the Indian Rupee pair could be the recent retreat in the WTI crude oil price as the black gold fades the previous day’s rebound from a two-week low, easing from an intraday high to $71.40 by the press time.
Moving on, the US Retail Sales for April, expected at 0.7% MoM versus -0.6% prior, appears the key for the USD/INR pair traders to watch for clear directions. More importantly, the US policymakers’ ability to offer a positive surprise to the markets, via either a strong solution to avoid the default or a basic guide to extend the debt ceiling, will be interesting to watch for clear directions.
Technical analysis
Failure to cross 82.50 hurdle keeps USD/INR bears hopeful even if the 200-DMA support of around 81.70 appears the key challenge for sellers.
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