After Monday’s corrective drop, the USD/INR remains moderately offered but lacks follow-through.
In June, India’s retail inflation fell, and the country’s covid circumstances improved.
Despite a light calendar in India, the US CPI and coronavirus headlines became the most important.
As Indian markets begin for business on Tuesday, the USD/INR continues under pressure around 74.50. While the market’s cautious optimism weighs on the US dollar (USD) and favors sellers, positive catalysts from India also put downward pressure on the rate.
India’s coronavirus (COVID-19) conditions are less severe than those in other Asian countries, thanks to a steady increase in vaccines. According to the Indian Health Ministry’s most recent illness data, the numbers are fluctuating around January levels.
The Consumer Price Index (CPI) in India fell short of expectations in June, falling to 6.26 percent YoY. Nonetheless, the data remain considerably above the Reserve Bank of India’s (RBI) objective, putting the USD/INR bears to the test. Fears of rising energy prices, as well as the government’s opposition to lowering the gasoline tax, may be on the same page.
It’s worth mentioning that, despite the covid worries in the Asia-Pacific area, market mood is still modestly favorable. As a result, the US dollar index (DXY) suffers minor losses, despite the fact that US 10-year Treasury rates have been positive for the third day in a row.
Looking ahead, the June US CPI data will be important to monitor for near-term trade direction, while virus updates and speculation about the RBI’s future measures may also keep USD/INR traders entertained.
In the midst of these bets, Morgan Stanley predicts that India’s inflation would have peaked in June and will gradually decline to an average of 5.1 percent in FY 2022. “With India’s policy focus on growth, the Monetary Policy Committee (MPC) should keep on hold in 2021 with greater discussion about inflation,” the bank said, according to Reuters.
USD/INR is heading towards the 74.00 threshold after closing below an ascending support line from May 31 near 74.60. However, the bears will find it difficult to break through a confluence of 100-day and 50-day SMAs at 73.60./n
