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  • USD/INR holds lower ground, snaps three-day winning streak.
  • India registers lowest virus-led death toll since April 18.
  • Options market favor bears as risk reversal jumps to three-month top.
  • Receding inflation expectations pull DXY back to facilitate the consolidation.

USD/INR extends pullback from late April’s top as sellers attack 74.00, down 0.21% around 74.09 amid the initial Indian trading session on Friday.

While the US dollar’s consolidation of the Fed-led solid gains triggered the pair’s initial profit booking, the latest fall could be linked to the recovering coronavirus (COVID-19) conditions in India.

As per the latest Health Ministry reports, per Reuters, India reports a 1,587 daily rise in coronavirus fatalities, the lowest since April 18, taking a total to 383,490. The news also mentions, “62,480 daily rises in coronavirus infections, taking total to 29.76 million.”

Additionally, receding US inflation expectations, per the latest 10-year breakeven inflation rate data from the St. Louis Federal Reserve (FRED), joins the optimism over US President Joe Biden’s infrastructure spending plan to weigh on the US dollar index (DXY) and favor USD/INR prices. It should be noted that an absence of any major data/events also allows the markets to book the Fed-led profits.

Even so, the options market remains bullish over the USD/INR prices as risk reversal, a gauge of bullish bets (call options) to the bearish one (put options) jump to the highest in three months with +0.250 levels.

Looking forward, USD/INR traders should keep their eyes on the DXY moves and inflation expectations for fresh impulse.

Technical Analysis

Failures to cross a seven-month-old horizontal resistance direct USD/INR towards the previous key hurdle, 50-day SMA level near 73.70. During the fall, the 74.00 can test the bears. Meanwhile, April 19-20 lows near 74.55 add to the upside filters.