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Fundamental Analysis

Indian Rupee snaps two-day uptrend as US Dollar cheers recession woes

  • USD/INR grinds near intraday high while positing the biggest daily gains in three weeks.
  • Softer Oil price, hopes of improving US-India ties fail to inspire Indian Rupee buyers.
  • US Dollar Index (DXY) eyes the first weekly loss in four as central banks roil market sentiment.
  • Preliminary PMIs for June, risk catalysts eyed for clear directions.

USD/INR bulls are back with a bang as the Indian Rupee (INR) prints the biggest daily slump, so far, in three weeks amid early Friday. That said, the pair buyers push the intraday high of near 82.10 while poking the key upside hurdle amid broad US Dollar strength. In doing so, the Indian Rupee fails to cheer the likely improvement in the US-India ties, as well as the downbeat Oil price, amid a risk-off mood.

As Indian Prime Minister (PM) Narendra Modi visit the US, Reuters said that US President Joe Biden and Narendra Modi hailed a new era in their countries’ relationship after the White House rolled out the red carpet for the Indian prime minister on Thursday, touting deals on defense and commerce aimed at countering China’s global influence.

On the other hand, WTI crude oil dropped for the second consecutive day to refresh a weekly low of around $69.00. The black gold dropped the most in a fortnight the previous day after the US Dollar rallied on fears of global economic slowdown and also cheered the hawkish testimony of Fed Chair Jerome Powell. Additionally, the fears of the US-China tension also weigh on the Oil price. It’s worth noting that India’s reliance on energy imports joins the record deficit to make the INR vulnerable to energy price moves.

Elsewhere, the US Dollar Index (DXY) picks up bids to extend the previous day’s rebound from the six-week low to around 102.55 by the press time.

A slew of central banks announced hawkish moves the previous day and bolstered concerns of “higher for longer” rates, which in turn roiled the market sentiment amid fears of economic slowdown and underpinned the US Treasury bond yields and the US Dollar. Further, hawkish testimony from Fed Chair Powell also weighs on the risk profile. Fed Chairman Jerome Powell repeated most of his previous day’s remarks during his testimony 2.0, this time in front of the Senate Housing Committee. Though his statements like, “(It) will be appropriate to raise rates again this year, perhaps two more times,” allowed the US Dollar to refresh the intraday high while eyeing to reverse Wednesday’s losses.

Alternatively, downbeat comments from Thomas Barkin, President of the Federal Reserve Bank of Richmond, as well as US Treasury Secretary Jannet Yellen, prod the US Dollar bulls earlier in the day. That said, Fed’s Barkin showed readiness to vote for rate cuts on conviction of a slowdown in inflation while US Treasury Secretary Yellen flags recession fears as Fed tightens policy.

Looking ahead, news on the US-India ties and the market’s risk catalysts will determine near-term USD/INR moves while the first readings of the US S&P Global PMIs for June can direct intraday traders of the Indian Rupee.

Technical analysis

Despite the latest rebound, USD/INR stays within a week-old symmetrical triangle, currently between 82.10 and 81.90. Adding strength to the upside filter around 82.10 is the 200-DMA. That said, a gradual recovery if the RSI (14) line from oversold territory favors the Indian Rupee (INR) bears.

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