- USD/INR extends Thursday’s rebound to cross weekly resistance line.
- USD regains upside momentum as inflation woes return to the table, raising doubts on Fed’s rejection of 75 bps rate hike.
- RBI’s surprise rate lift failed to keep INR firmer amid elevated oil prices, the market’s risk-aversion.
- US jobs report becomes the key amid hopes of heavier-than-expected rate hikes.
USD/INR grinds higher around the intraday top, keeping the bounce off a three-week low, as the US dollar cheers rush to risk-safety ahead of the key employment report on Friday. The Indian rupee (INR) pair’s weakness could also be linked to the firmer oil prices and challenges for China, other than what’s already there for the global economy.
US Dollar Index (DXY) regained its strength the previous day after the Bank of England (BOE) renewed inflation fears, providing another catalyst to push Fed towards heavier rate hikes than the 50 basis points (bps) already signaled and priced in. Following that, the greenback gauge reversed the post-Fed losses, currently up 0.04% near 103.60.
Other than the return of the market fears and the USD strength, strong oil prices, mainly due to Thursday’s verdict of the OPEC+ group, comprising the Organization of the Petroleum Exporting Countries (OPEC) countries and allies including Russia. The oil cartel announced to continue with the current policy of raising monthly output by 432K barrels per day (BPD). Also supporting the oil prices, as well as weighing on the risk catalysts is the European Union’s (EU) oil embargo on Russian imports. That said, the WTI crude oil prices stay mildly bid around $107.70 by the press time after refreshing a six-week high the previous day. As India is a big importer of oil and witnesses ballooning budget deficits, a jump in the oil prices drowns INR.
Elsewhere, recently downbeat economics from Asian major China and Indonesia’s restriction on the exports of cooking oil ingredients, which was duly raised in the latest World Trade Organization (WTO) meet, also propel USD/INR.
On the contrary, the heavily oversubscribed initial public offering (IPO) of the nation’s largest insurance provider and firmer activity numbers for March, as well as the Reserve Bank of India’s (RBI) rate hike, challenge the USD/INR upside moves.
Amid these plays, S&P 500 Futures print mild losses and the Indian indices see the red whereas the US 10-year Treasury yields remain firmer around the highest levels since late 2018 marked the previous day.
Moving on, USD/INR traders will pay attention to the US employment data due to the Fed’s hesitance in raising the benchmark rate by 75 basis points (bps). That said, the headline US Nonfarm Payrolls (NFP) to ease to 391K from 431K whereas the Unemployment Rate may also decline to 3.5% from 3.6%.
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Technical analysis
USD/INR pokes a one-week-old resistance line, around 76.65, a clear break of which won’t hesitate to renew the weekly top surrounding 77.10. The bullish bias also takes clues from the firmer RSI and the pair’s ability to stay beyond an upward sloping trend line from mid-January, near 76.00 by the press time.