USD/INR Price News: Rupee retreats to 82.00 with eyes on India Inflation

• USD/INR picks up bids to pare the previous day’s pullback from thee-week high.
• US Dollar pares post-inflation losses as traders seek more details to confirm dovish Fed bias.
• Cautious optimism in the markets, firmer Oil price and hopes of no imminent RBI rate hike weigh on Indian Rupee.
• US PPI, India inflation numbers eyed for clear directions.

USD/INR clings to mild gains around 82.00 as the market slips into consolidation mode early Thursday. In doing so, the Indian Rupee (INR) pair reverses the previous day’s pullback from the highest levels in two weeks, due to the downbeat US inflation data.

In addition to the market’s paring of the latest moves, hopes of witnessing cooler inflation data from India and another chance for the Reserve Bank of India (RBI) to leave the monetary policy unchanged also seem to have propelled the USD/INR prices. As per the latest forecasts, the Indian Consumer Price Index (CPI) is likely to remain near the lowest levels in 18 months despite expectations favoring a 5.96% YoY figure, versus 5.66% prior.

Some on the street do expect a surprise fall in the Indian Inflation gauge to 4.80%, which in turn could defend RBI doves as the economy keeps ignoring the burden from higher rates. “Predictions ranged from 4.40% to 5.80%, with respondents expecting inflation to remain below the RBI's 6.00% upper tolerance limit for the second consecutive month,” said Reuters.

Apart from preparations for the Indian inflation data, firmer Oil prices also weigh on the INR due to India’s heavy energy imports and record deficit. That said, WTI crude oil picks up bids to reverse the previous day’s pullback from a one-week high, up 0.65% intraday near $73.25 at the latest.

Furthermore, softer China Consumer Price Index (CPI) and Producer Price Index (PPI) data also propel the USD/INR prices. That said, China's CPI eases to 0.1% YoY in April from 0.7% prior, versus 0.3% expected, while the PPI slides to -3.6% YoY compared to -3.2% market consensus and -2.5% previous readings.

On the other hand, US Consumer Price Index (CPI) eased to 4.9% YoY for April versus market expectations of reprinting 5.0% inflation mark, marking the first below 5.0% print in two years. The MoM figures, however, matched the upbeat 0.4% forecasts compared to 0.1% previous readings. Further, the CPI ex Food & Energy, known as the core CPI, matched 5.5% and 0.4% market consensus on a yearly and monthly basis respectively versus 5.6% and 0.4% priors in that order.

On a different page, market sentiment remains mildly positive amid the US policymakers’ preparations to avoid debt ceiling expiry despite failing in the initial attempt. Furthermore, expectations of the US-China top-tier policymakers’ meeting also underpin the slightly upbeat sentiment, which in turn allows the US Dollar bears to take a breather despite downbeat yields and mildly firmer US stock futures.

Moving on, the US PPI for April, expected to ease to 2.4% YoY, can entertain short-term USD/INR traders ahead of Friday’s key inflation and activity data from India.

Technical analysis

USD/INR rebounds from the 21-DMA support of around 81.90, backed by bullish MACD signals. The recovery moves, however, remain elusive unless the quote stays below the 82.05-10 resistance confluence including the 50-DMA and a two-month-old descending trend line.