- USD/INR snaps two-day downtrend, retreats from intraday high of late.
- India registers the biggest slump in weekly covid cases since mid-June.
- Risk-off mood underpins US dollar rebound, China, Evergrande in focus.
- US NFP, stimulus headlines become the week’s key event to follow for clear direction.
USD/INR reverses pullback from two-month high above 74.00 amid risk-off mood during early Monday. That said, the Indian rupee (INR) pair prints 0.06% intraday gains around 74.20 heading into the European session.
Having witnessed a consolidation move during the last two days, the USD/INR pair cheers the fresh risk aversion that underpins the US dollar’s safe-haven demand to remains firmer by the press time, despite recent weakness.
In doing so, the pair ignores India’s upbeat coronavirus conditions, mainly due to the faster vaccinations. “India reported 1.56 lakh new Coronavirus infections last week, a nearly 22% decline over the previous week — the sharpest fall since mid-June, according to data from the Union Health Ministry,” said Financial Express.
As per the latest Ministry data, conveyed by Reuters, India reports a 20,799 daily rise in COVID-19 infections against 22,842 marked yesterday. Further, the virus-led death toll dropped from 244 to 180 during the stated period.
On the contrary, Evergrande’s suspension from trading in Hong Kong and the US dislike for China’s activities near Taiwan weigh on the market sentiment. On the same line is the CNBC news, relying on sources, which said, “US Trade Representative Katherine Tai will announce that China hasn’t complied with the phase one trade deal during her speech on Monday.”
Alternatively, the hopes of US stimulus, backed by President Joe Biden and House Speaker Nancy Pelosi, join expectations that Beijing will limit the negative fallout of the Evergrande’s default to challenge the market pessimism.
Amid these plays, stock futures print mild losses while the US Treasury yield and the US Dollar Index (DXY) pause previous declines by the press time.
Looking forward, US Factory Orders for August, expected 0.9% versus 0.4%, may offer intraday clues but all eyes will be on Friday’s US Nonfarm Payrolls (NFP) for September amid Fed tapering talks. Also important is the US Democratic Party’s battle to unveil the much-awaited stimulus and debt ceiling extension.
Technical analysis
Although September’s peak surrounding 74.60 restricts the immediate upside of the USD/INR prices, a convergence of the 50-day and 20-day EMA, as well as an ascending support line from September 03, near 73.90, becomes the key hurdle for the pair seller’s entry.
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