USD/INR Price News: Rupee stays firmer around 74.50 ahead of India Union Budget

• USD/INR bears keep reins near one-week low ahead of the key India Union Budget.
• Hopes of increased spending, tax reliefs favored INR bulls of late.
• Mixed sentiment in Asia adds to the trading filters, US ISM Manufacturing PMI eyed as well.

Having dropped the most since late August the previous day, the USD/INR pair remains on the back foot around 74.50 as traders await India Union Budget during early Tuesday.

“Finance minister Nirmala Sitharaman is expected to announce more spending on roads, railways, besides higher subsidies for affordable housing amid growing public criticism over inadequate relief following the economic disruption after the outbreak of pandemic in 2020,” said Reuters.

It should be noted that the Indian government report warned the previous day of growing risks from global inflation led by rising crude oil prices could hit the economy, while projecting growth of 8% to 8.5% next fiscal year compared to 9.2% in the current fiscal year and 6.6% contraction in the previous year, per Reuters.

In addition to the pre-budget caution, sluggish sentiment in the market and the US dollar’s inability to rebound also weigh on the USD/INR prices.

That said, the Russia-Ukraine tussles join the recent news from Reuters that the US weighs more troops to Eastern Europe beyond 8,500 on alert. Additionally, mixed concerns over the size of the Fed’s rate hike, mainly challenged by the recent Fedspeak highlighting inflation fears but staying away from confirming a 0.50% rate lift, also challenge the risk appetite of late.

Against this backdrop, the US 10-year Treasury yields remain sluggish around 1.77% whereas the S&P 500 Futures drop 0.45% intraday whereas the Asia-Pacific shares trade mixed amid off in China and Hong Kong.

Moving on, the Indian government’s ability to match high hopes amid Omicron woes will be crucial for USD/INR bulls. Following that, the US ISM Manufacturing PMI for January, expected 57.5 versus 58.7 prior, will be important to watch while risk catalysts could keep playing the background music.

Technical analysis

A clear downside break of a three-week-old ascending trend line directs USD/INR sellers towards the 200-DMA level of 74.26.

Alternatively, a clear upside break of the previous support line, near 74.77, will need validation from the 50-DMA and the recent swing high, respectively near 74.90 and 75.34, to convince USD/INR bulls.