USD/INR picks up bids to brace for the first weekly gain in three.
Firmer Oil price, dovish hopes from RBI underpin bearish bias surrounding Indian Rupee.
US Dollar struggles to find traction amid light calendar, pre-Fed blackout.
Increase in July Fed rate hike bets put a floor under USD/INR price during dicey markets.
USD/INR clings to mild gains around 82.55 as it defies the previous day’s Doji candlestick amid early Wednesday. In doing so, the Indian Rupee (INR) pair seems to justify the market’s dovish hopes from the Reserve Bank of India (RBI) ahead of Thursday’s monetary policy decision.
In this matter, Reuters said that the RBI decision is due on Thursday when it is expected to leave the repo rate unchanged at 6.50% after having surprised markets by holding rates in April. It should be noted that the news also quotes an anonymous trader who said, “RBI rate decision could ‘lend some volatility,’ but “there was no way” it will change the current status quo on USD/INR.”
Apart from the RBI’s likely status quo, recent improvements in the prices of WTI crude oil, India’s major import item, also weigh on the Indian Rupee and propel the USD/INR price. That said, WTI crude oil remains mildly bid near $7src.70 as it justifies a downbeat US Dollar and a surprise draw in the weekly Oil inventory data from the American Petroleum Institute (API). It should be noted that the global oil producers’ readiness for further output cuts joins improvement in China data to underpin the upbeat bias surrounding the black gold which is also a major export earner for Canada.
Elsewhere, US Dollar Index (DXY) struggles to defend the previous day’s corrective bounce while making rounds to src04.src0, mostly indecisive on a day by the press time. In doing so, the greenback’s gauge versus six major currencies suffers from downbeat market bets on the Fed’s next move amid the pre-FOMC blackout for the policymakers. That said, the interest rate futures show a nearly src5% probability of a June rate hike. The reason could be linked to downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout.
It should be noted that the recent weakness in China’s trade numbers and previously positive PMIs raise concern about the market’s future and hence weigh on the INR amid the indecision.
Looking ahead, a light calendar and absence of Fed talks can restrict the USD/INR moves while the pre-RBI anxiety adds strength to the trading restrictions. Even so, a surprise rate hike from the RBI, which is least expected due to the recent easing in Indian inflation, can trigger the Indian Rupee’s rebound from the technical level mentioned below.
Technical analysis
USD/INR pair’s recovery from the 50-day Exponential Moving Average (EMA), around 82.30 by the press time, needs validation from a two-week-old resistance line, near 82.60 at the latest, to convince the buyers.
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