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  • USD/INR struggles to extend the previous day’s recovery gains from 75.56/55.
  • Rating agencies, Indian markets fail to praise the government’s optimistic aid package.
  • Risk-tone dwindles amid quiet markets, trade wars stay on the cards.
  • US FOMC minutes will be watched to confirm no negative Fed rate notions.

Having flashed gains the previous day, USD/INR seesaws around 75.71/70 amid the early Wednesday’s trading. While the quiet markets seem to restrict the pair’s moves, disappointment from the Indian government’s budget, as well as mild risk-off sentiment, keeps buyers hopeful.

Although global leaders seem to cheer the Indian lockdown, Narendra Modi-led Bharatiya Janata Party (BJP) has been under immense pressure at home. Be it allegations over mishandling of inter-state labor movement or lack of resources at home, nothing could please the Indian locals despite the government’s 20 trillion rupee aid package.

The government measures are unlikely to stimulate demand as package focused on supply-side, says domestic credit rating agency Crisil. On the other hand, the global rating giant Fitch said, “the government’s Rs 20.97 lakh crore COVID-19 package lacks in addressing immediate concerns of the economy as the actual fiscal impact of the additional stimulus is only about 1 percent of GDP as opposed to the claim of 10 percent.”

Elsewhere, the market’s risk-tone remains sluggish as the US policymakers keep pushing for an investigation into China’s role in the coronavirus (COVID-19) outbreak. Also favoring the risk aversion could be Aussie-China tussle. Furthermore, no rate change from the People’s Bank of China (PBOC) adds to the list of the dull catalysts.

That said, US 10-year Treasury yields remain depressed below 0.70% whereas stocks in Asia-Pacific alternate gains with losses. Additionally, India’s BSE SENSEX and NIFTY 50 flash over 0.50% gains amid hopes of further stimulus.

Looking forward, minutes of the US Federal Reserve’s latest monetary policy will be the key for the rest of the day. Traders will be particularly interested in seeing how strongly the central bank policymakers can deny negative rates.

Read: FOMC Minutes Preview: Watching for hints of negative rates

Technical analysis

The bears targeting a return of the monthly low near 75.05/75.00 remain hopeful unless the pair breaks a falling trend line from April 22, at 75.90 now.