USD/INR Price News: Indian rupee retreats to 78.00 with eyes on Fed’s Powell

• USD/INR refreshes intraday high amid crude oil rebound, ignores softer USD.
• Fears of India’s elevated inflation join hopes of Fed’s aggression to propel the pair.
• Juneteenth holiday, lack of major data/events failed to impress buyers.
• Second-tier US data, risk catalysts can provide short-term directions ahead of Powell’s Testimony.

USD/INR picks up bids to refresh daily top around 78.00, following a sluggish week-start, as inflation fears weigh on the Indian rupee (INR) buyers during early Tuesday. Even so, the US dollar’s recent pullback appears to guard the pair’s upside momentum amid a lackluster Asian session.

Inflation woes join the rebound in the crude oil prices to propel the pair despite the US dollar’s broad weakness.

That said, an Asian research house Nomura eyes more than double Indian inflation for 2022 and keeps the INR sellers hopeful. “India’s food and beverage price inflation is expected to remain elevated through 2022, averaging over 8.0% on-year against 3.7% in 2021, Nomura says per Reuters.

Elsewhere, WTI crude oil prices hold onto the previous day’s rebound from the monthly low, up 0.90% intraday around $109.80 at the latest. Considering India’s heavy reliance on energy imports and a record budget deficit, firmer crude drowns the INR.

On a broader front, the US Dollar Index (DXY) extends the week-start losses to 104.30, down 0.20% intraday by the press time, which in turn allows the commodities and Antipodeans to cheer the risk-on mood. The greenback’s weakness could be linked to the recently downbeat US data and softer US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data. It’s worth noting that the US inflation expectations refreshed monthly low on Friday.

Also adding strength to the commodities like crude are headlines suggesting an improvement in China’s covid conditions and the US readiness to ease the Trump-era tariffs on the dragon nation seems to probe the Steel Price downside. However, the fears of economic slowdown and the Fed’s aggression seem to outlaw the recent consolidation in the markets and keep the USD/INR buyers hopeful.

Amid these plays, the S&P 500 Futures rise around 1.6%, up for the second consecutive day, as it flashes the 3,735 level at the latest. On the same line, the US 10-year Treasury yields extend Friday’s gains to begin the week’s trading around 3.3%, up four basis points (bps) by the press time.

That said, headlines concerning risk catalysts will join the Chicago Fed National Activity Index and the US Existing Home Sales for May to entertain intraday traders but major attention will be on Fed Chair Jerome Powell’s Testimony on the bi-annual Monetary Policy Report.

Technical analysis

A clear downside break of a seven-week-old ascending trend line joins Monday’s “Gravestone Doji” candlestick to keep USD/INR bears hopeful. However, multiple tops marked around 77.85 appear to restrict short-term declines of the pair. Alternatively, the support-turned-resistance line and the latest high, respectively around 78.10 and 78.40, could lure the buyers during the fresh upside.