- USD/INR reverses a part of the previous rebound amid DXY weakness.
- Indian rupee gains on hopes of a February rate hike by the RBI.
- USD/INR breaches 100-DMA but bullish RSI could keep downside capped.
USD/INR has returned to the red zone after kicking off February on a positive note, as sellers continue to lurk just below the $75 mark.
The pullback in the spot could be associated with the ongoing corrective decline in the US dollar across its main pairs, as Fed angst subsides ahead of key employment data.
Markets expect the Reserve Bank of India (RBI) to start the tightening cycle from this month, offering some support to Indian rupee bulls.
Analysts at Morgan Stanley expect RBI to start normalization with a reverse repo hike in February, followed by repo rate hike from April.
This comes as they see “India’s budget math largely reasonable with potential upside for tax revenue estimates.“
On the contrary, Oxford Economics noted that India’s uneven recovery requires more targeted support in the short term.
Markets now look forward to the US ADP jobs data and oil-price action for fresh trading impetus on the pair.
USD/INR: Technical outlook
At the time of writing, the spot is pressuring lows near 74.70, posting moderate losses on the day.
In doing so, the spot has breached the 100-Daily Moving Average (DMA) at 74.71, which was the previous resistance.
If the downtick gathers steam, then USD/INR could see a fresh drop towards the mildly bullish 21-DMA at 74.46.
Further south, the horizontal 200-DMA supports at 74.27 and could challenge bullish commitments.
USD/INR: Daily chart
The 14-day Relative Strength Index (RSI), however, is sitting just above the midline, suggesting that the downside could be limited.
Should buyers regain control, Tuesday’s high of 74.86 will be retested, allowing for the further upside towards the 75 level. The ascending 50-DMA hangs around that price zone too.
Recapturing the latter would be critical to initiating a meaningful recovery towards the January highs of 75.34.
USD/INR: Additional levels
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