Rupee bears the burden of bullish oil, USD above 77.50 ahead of Indian GDP

  • USD/INR takes bids to refresh intraday high amid broad US dollar rally.
  • Firmer oil prices, strong yields drown INR ahead of India’s Jan-Mar GDP.
  • Easing bets on aggressive Fed rate hikes, cautious sentiment ahead of Biden-Powell meet USD rally.

USD/INR remains on the front foot around 77.65, a refreshing intraday high as firmer USD and oil prices weigh on the Indian rupee (INR) pair during Tuesday’s Asian session. It’s worth noting that cautious sentiment ahead of India’s January-March GDP and a meeting between US President Joe Biden and Fed Chair Jerome Powell are also driving the rate lately.

The US Dollar Index (DXY) bounces off the monthly low and revisits the 101.50 level, up 0.23% on the latest on the day amid mixed sentiment and firmer US Treasury yields.

Although the easing of virus-related lockdowns joins bearish bets on the Fed’s aggressive rate hikes in favor of US equity futures as well as Asia-Pacific equities, geopolitical headlines join firmer yields to challenge optimists. However, the Eurogroup agrees to new sanctions against Russia, while Ukrainian President Volodymyr Zelenskyy said the situation in the Donbass region remains “extremely difficult”, according to Reuters.

Elsewhere, comments from Fed Board of Governors Christopher Waller also appear to underpin US Treasury yields and the greenback’s recent bullishness. The policymaker said he supports a further 50 basis point hike in interest rates at the next Fed meetings and that interest rates should stay above neutral by the end of the year to ease demand, Reuters reported.

It should be noted that a two month high in oil prices of around $116.50 at press time is also weighing on the INR due to India’s record deficit and heavy reliance on energy imports.

Looking ahead, India’s January-March GDP, which is expected to come in at 4.0% yoy versus 5.4% yoy, appears to be an immediate catalyst for USD/INR pair traders. After that, the Chicago Purchasing Managers’ Index and the Dallas Fed Manufacturing Business Index for May will grace the daily calendar. The Biden-Powell talks and geopolitical headlines from the Eurogroup meeting will be decisive for the rate.

Technical Analysis

The higher-low formation joins the bullish RSI divergence to hold USD/INR buyers hoping to break the immediate 77.30-77.80 trading range on the upside.

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