Indian rupee eases inside routine range above 77.00 amid indecision

  • USD/INR picks up bids to snap three-day downtrend, bounces off weekly low.
  • FOMC Minutes, RBI’s assurance to limit “runaway” INR slump challenge pair buyers.
  • Firmer oil prices, subdued sentiment and exodus of funds from Indian equities bar gate for bears.
  • US GDP, Fed’s preferred inflation gauge will be important this week, risk catalysts should be watched too.

USD/INR consolidates weekly losses around 77.55, staying inside a fortnight-long trading range surrounding 77.30-80 as traders struggle with diverse catalysts during Thursday’s Asian session.

Among them, the latest Federal Open Market Committee (FOMC) Minutes and the recently active Reserve Bank of India (RBI) seem to restrict the pair’s upside momentum. However, pessimism surrounding the Indian stock market, strong oil prices and sluggish risk appetite keep the USD/INR bulls hopeful.

That said, the recent Fed minutes mentioned that the policymakers endorsed the idea of ​​50 basis points (bps) rate hikes for only the next couple of meetings and raised doubts on the rate-lift trajectory past September, which in turn favored sentiment. On the other hand, the RBI recently assured investors of not allowing “runaway” INR depreciation limits USD upside, per Reuters.

On the other hand, Indian equities are on the way to posting the first yearly loss in seven as broad fears of growth and inflation push foreign investors to flee, marking the record outflow of foreign funds during the first five months of 2022.

Further, WTI crude oil prices also print mild gains around $111.00 by the press time and brace for the sixth monthly run-up. Considering India’s record deficit and heavy reliance on oil imports, firmer energy prices drown the Indian rupee (INR).

Elsewhere, comments from US Trade Representative General Counsel Greta Peisch suggesting, “Review of US-Sino tariffs is likely to take ‘months’,” becomes a fresh threat to the US-China trade relations. Previously, Beijing criticizes the US Draft Security Council resolution on North Korea and added strength to the Sino-American tensions. Also negative from China are the covid-led lockdowns that weigh on the world’s second-largest economy, also Australia’s biggest trading partner.

It’s worth noting that fears of global recession due to the Ukraine-Russia crisis, recently backed by World Bank President David Malpass also favor USD/INR prices. “Russia’s war in Ukraine and its impact on food and energy prices, as well as the availability of fertilizer, could trigger a global recession,” said World Bank’s Malpass on Wednesday during an event hosted by the US Chamber of Commerce.

Moving on, off in major European bourses join a light calendar to restrict USD/INR moves but the second reading of the US Q1 2022 GDP, the annualized figure is expected to remain unchanged at -1.4%, and will be important to watch. Also crucial will be Personal Consumption Expenditure (PCE) details for April and weekly jobless claims.

Technical analysis

Even if a choppy trading range between 77.30 and 77.80 restricts short-term hint USD/INR moves, RSI conditions at the receding bullish momentum. However, sellers need to wait for a clear break below 77.30 for fresh entries. On the contrary, the 10-DMA level of 77.56 guards immediate recovery moves ahead of 77.80.

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