• USD/INR grinds higher after rising the most in six weeks the previous day.
  • Hawkish Fedspeak, fears surrounding China challenge traders ahead of long weekend in India.
  • Indian CPI is likely to have eased in July but the distance from RBI’s target will be the key to watch.

USD/INR braces for Indian inflation around 79.65-70 during Friday’s Asian session, after rising the most since late June the previous day.

The market’s risk-aversion wave and no major positives at home propelled the USD/INR prices the previous day. However, cautious sentiment ahead of the Indian Consumer Price Index (CPI) for July and the first impressions of the US Michigan Consumer Sentiment Index (CSI) for August seems to restrict the quote’s latest moves.

Hawkish Fedspeak, despite the downbeat US inflation numbers, propelled the US Treasury yields and favored the USD/INR buyers the previous day.

On Thursday, the US Producer Price Index (PPI) for July tracked the headline Consumer Price Index (CPI) while easing to 9.8% YoY versus 11.3% prior and 10.4% market forecasts, the data published by the US Bureau of Labor Statistics revealed. Details suggest that the monthly PPI dropped to the lowest levels since May 2020, to -0.5% compared to 1.0% expected and 0.2% prior, which in turn signaled more easing of inflation fears. Elsewhere, US Initial Jobless Claims eased to 262K for the week ending August 6 versus 263K expected and downwardly revised 248K prior.

However, the Fed policymakers resist cheering the latest weakness in price pressure as San Francisco Fed President Mary Day recently backed opportunities of witnessing another 75 basis points (bps) of a rate hike in September, while also suggesting an upfront 0.50% rate hike to be sure. Previously, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans sounded grim. That said, Fed’s Kashkari mentioned that he hasn't "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Further, Fed policymaker Evens stated, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.

Elsewhere, firmer oil prices also weighed on the USD/INR prices, due to India’s reliance on energy imports and record high Current Account Deficit (CAD). WTI crude oil prints a 0.30% intraday loss at around $93.00, snapping a three-day uptrend, amid downbeat demand forecasts for 2022 by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), published on Thursday, appear to weigh on the quote. Before that, a softer US dollar appeared to have helped the black gold prices.

On a different page, US President Joe Biden’s pause in announcing tariff relaxations to China, actually the removal of the Trump-era tariffs, gain major attention and renew the Sino-US tussles to weigh on the market sentiment. Additionally, a jump in the coronavirus cases from China also propels the USD/INR pair. Furthermore, Taiwan’s criticism of the “One China” policy and US House Speaker Nancy Pelosi’s support for Taipei acts as an extra flavor to the pair buyers.

Amid these plays, Wall Street began Thursday on a positive side before closing mixed while the US 10-year Treasury yields rallied 10 basis points (bps) to 2.88% at the latest. It’s worth noting that the S&P 500 Futures remains indecisive at around 4,215 and the US Treasury yields remain firmer by the press time.

Moving on, USD/INR traders should pay attention to the Indian CPI data for July, expected 6.78% versus 7.01% prior, for fresh impulse. India's retail inflation likely eased in July due to a fall in food and fuel prices yet stayed well above the Reserve Bank of India's upper tolerance limit for a seventh consecutive month, a Reuters poll found ahead of the data release.

Following that, US Michigan Consumer Sentiment Index (CSI) for August, expected at 52.5 versus 51.5 prior, will be important to watch for clear directions.

Also read: Michigan Consumer Sentiment Index Preview: Good news for the dollar but not for households

Technical analysis

A daily closing beyond the monthly resistance line, now support around 79.50, keeps USD/INR buyers hopeful of reaching the 80.00 threshold one more time.

Additional important levels

Overview
Today last price 79.624
Today Daily Change -0.0381
Today Daily Change % -0.05%
Today daily open 79.6621
 
Trends
Daily SMA20 79.5276
Daily SMA50 78.9386
Daily SMA100 77.8211
Daily SMA200 76.4585
 
Levels
Previous Daily High 79.6881
Previous Daily Low 79.072
Previous Weekly High 79.793
Previous Weekly Low 78.4128
Previous Monthly High 80.208
Previous Monthly Low 78.8583
Daily Fibonacci 38.2% 79.4527
Daily Fibonacci 61.8% 79.3073
Daily Pivot Point S1 79.26
Daily Pivot Point S2 78.8579
Daily Pivot Point S3 78.6438
Daily Pivot Point R1 79.8761
Daily Pivot Point R2 80.0902
Daily Pivot Point R3 80.4923

 

 

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