- USD/INR struggles to benefit from softer USD, downbeat oil prices.
- Fears of inflation join RBI rate-hike concerns and recession woes to weigh on INR.
- Fed Chair Powell’s Testimony will be the week’s key event.
USD/INR remains pressured around the intraday low of 77.90 as US dollar bulls take a breather amid the Juneteenth holiday on Monday. Also keeping the Indian rupee (INR) pair sellers hopeful is the recently softer oil prices and hopes of the RBI’s rate hike.
US Dollar Index (DXY) fades Friday’s recovery moves, down 0.23% intraday around 104.40, as the greenback bulls await fresh clues from the Fed policymakers. In doing so, the US dollar gauge consolidates the previous three-week uptrend amid a quiet session during the Juneteenth holiday.
On the other hand, WTI crude oil prices stay depressed at the monthly low flashed on Friday, down 0.90% intraday around $107.50 by the press time. The black gold dropped the most since early May on the previous day as markets feared recession and rushed to the US dollar for a haven.
At home, India’s retail inflation eased from an eight-year high to 7.04% in May. However, the bullish bets over the Reserve Bank of India’s (RBI) hawkish move remain intact.
“June inflation is still tracking at about 7%, much above RBI’s upper tolerance band of 6% inflation. Our baseline expectation remains of a 25 bps hike in August with risk skewed toward a larger hike,” said JP Morgan analysts in a note per Reuters. “Much would depend on how external inflationary impulses evolve and whether second-round effects are getting entrenched.”
Despite the latest weakness, the USD/INR bulls stay hopeful as the key US policymakers keep suggesting higher inflation and raise fears of economic slowdown, which in turn should underpin the US dollar’s safe-haven demand. Among them were Minneapolis Fed President Neel Kashkari, US Treasury Secretary Janet Yellen and Cleveland Federal Reserve Bank President Loretta Mester.
Looking forward, USD/INR traders should pay attention to Fed Chairman Jerome Powell’s Testimony for fresh impulse as the Fed Boss is likely to be questioned on inflation woes to justify the recent rate hike. Also important will be the initial readings of the US S&P 500 PMIs for June.
Technical analysis
Despite the latest corrective pullback from the 10-DMA level surrounding 77.90, USD/INR holds onto the downside break of a six-week-old ascending trend line, which in turn suggests further grinding towards the south.