USD/INR refreshes four-week low to 71.10 as Indian traders enter the key week

• USD/INR drops more than 20 pips during the active hours of Indian markets.
• Ex-RBI Governor says India is in “growth recession”, suggests trade agreements, broad reforms.
• Fed, ECB, UK election and trade war to direct this week’s momentum.

USD/INR declines to 71.10 ahead of the European session on Monday. The quote recently dropped heavily as traders booked profits from the US dollar’s (USD) surge on Friday. Also affecting the trading sentiment is the presence of key events during the week.

The USD registered a broad run-up on Friday after the headline employment and consumer sentiment data from the United States (US) surprised markets. The greenback’s rise could also be attributed to Xinhua’s news that China is likely to waive tariffs for the US soybeans, pork.

Even so, the weekend news from Beijing wasn’t good enough as the Financial Times (FT) conveyed the dragon nation’s order to bar government offices from foreign computers and software. Also, downbeat trade data from China and Global Times headlines shrugging off the US-China trade war impact, seem to have a negative impact on the trade sentiment off-late.

Furthermore, Bloomberg came out with the news that anticipates increasing protests in Hong Kong, which in turn could result in the increasing odds against the US-China phase trade deal that’s one of the main catalysts of the week. The reason being the US tariffs on Chinese goods that are up for activation on December 15. The Trump administration has turned down the scope of stepping unless they have a phase-one with China.

With this, the US 10-year treasury yields stay under pressure around 1.84% while most of the Asian stocks remain sideways. Further, the S&P 500 Futures turn negative to 3,141 by the press time.

Elsewhere, Moneycontrol came out with the news quoting the ex-Reserve Bank of India (RBI) Governor Raghuram Rajan. The ex-officio said India is in the midst of a "growth recession" with signs of a deep malaise in the Indian economy. Mr. Rajan also called for reforms to liberalize capital, land and labor markets, and spur investment as well as growth. Furthermore, the former World Bank economist also urged India to join free trade agreements judiciously in order to boost competition and improve domestic efficiency.

The monetary policy meetings by the European Central Bank (ECB) and the US Federal Reserve (Fed), coupled with US tariff headlines and election in the United Kingdom (UK), will dominate this week’s moves. However, second-tier output and inflation numbers from India could offer intermediate moves.

Technical Analysis

The pair tests 100-day Simple Moving Average (SMA), near 71.12 now, a daily closing below the same could recall November lows of 70.50. On the upside, buyers will look for entry around 71.50.