USD/INR Price News: Indian rupee recovery eyes 77.00 ahead of US inflation

• USD/INR extends pullback from record top, takes offers to renew intraday low.
• Better sentiment, softer yields probe USD buyers ahead of the key US CPI data.
• Fears of ‘shocker’ inflation from India jostle RBI intervention to defend the pair buyers.
• Fedspeak, China and Russia are extra catalysts to watch for clear directions.

USD/INR takes offers to renew intraday low around 77.20, stretching the previous day’s U-turn from a record high, as markets brace for the all-important US inflation data during early Wednesday.

Other than the consolidation amid pre-CPI anxiety, headlines from Shanghai local authorities that mentioned no virus spread in eight districts and firmer inflation numbers from China also favored the latest improvement in the market’s mood. Additionally, lower yields probe the US dollar buyers ahead of the key data and hence add strength to the latest weakness in the USD/INR prices.

Also positive for the Indian rupee (INR) could be the chatters surrounding the Reserve Bank of India’s (RBI) intervention to defend the national currency.

Mixed comments from the Federal Reserve policymakers seemed to have weighed on the US Treasury yields. Earlier in Asia, Atlanta Fed President Raphael Bostic mentioned that the US economy is strong and demand is high while also expecting the neutral rate at 2.0-2.5%. Even so, Cleveland Fed President and FOMC member Loretta Mester kept the bears hopeful as she said, on Tuesday, that the Fed doesn't rule out a 75 basis points rate hike “forever”.

Meanwhile, China’s “Zero Covid Tolerance” policy despite the World Health Organization’s (WHO) push to ease the rigid activity restrictions in Shanghai and Beijing also tests the latest optimism in the markets. Furthermore, the tales of the Russia-Ukraine war and its likely negative implications also keep gold sellers hopeful. As per the latest updates, Europe needs to divert its gas flow from Russia which previously used to arrive via Ukraine. On the same line are the fears of India’s consumer inflation jumping to an 18-month high, as per a Reuters poll, as well as recent improvement in the oil prices.

That said, the US 10-year Treasury yields and the US Dollar Index (DXY) remain pressured at around 2.99% whereas the S&P 500 Futures print mild gains near the 4,000 level after a mixed closing on Wall Street.

Given the light calendar in India ahead of Thursday’s inflation data, the USD/INR moves will rely on the US Consumer Price Index (CPI) figures, expected to ease to 8.1% YoY from 8.5% prior.

Also read: US CPI Preview: Hard core inflation to propel dollar to new highs, and two other scenarios

Technical analysis

USD/INR pair’s pullback from the five-month-old resistance line, around 77.52 by the press time, aims to revisit March’s peak of 77.17 before the 77.00 threshold could lure the bears. It’s worth noting, however, that a clear downside break of the 77.00 round figure could make the quote vulnerable to decline towards the late 2021 peak of 76.59.

Alternatively, sustained run-up beyond 77.52 won’t hesitate to challenge the 78.00 round figure ahead of aiming the 80.00 psychological manget.