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  • USD/INR stands on slippery ground, takes the offers around two-month low.
  • Option markets stay bullish on INR for third consecutive week.
  • Fears of rising unemployment, weaker GDP in India battle pre-US PCE, budget mood.

USD/INR drops the most in a week as bears attack late March levels, down 0.68% intraday around 72.49 during the initial Indian session trading on Friday. The Indian rupee (INR) pair refreshes two-month low the previous before bouncing off 72.50, also closing around 73.00, amid broad US dollar recovery. However, the cautious sentiment afterward seems to weigh on the quote by the press time.

Among the sentiment-challenging factors, chatters over India’s future hardships, mainly due to the coronavirus (COVID-19) resurge, as well as doubts over the US budget and inflation, gain major attention. Also contributing to the mood could be the fresh covid fears from Japan and Australia.

Further, the scheduled release of the US budget and Core Personal Consumption Expenditure (PCE) Price Index for April add hurdles to the smooth markets.

It’s worth noting that expectations of further stimulus from the Indian government and the recent easing of the covid infections add to the INR strength. On the same line could be the three consecutive negative weekly prints of the USD/INR risk reversal.

Against this backdrop, stock futures and the Treasury yields are mildly bid but the US dollar index (DXY) fades early Asian gains.

Moving on, USD/INR traders will keep their eyes on the market sentiment and US Core PCE Price Index figures, not to forget the US budget, for fresh impulse. While the inflation data may keep USD/INR sellers hopeful, expectations of further stimulus from US President Joe Biden can help the US dollar.

Read:  US PCE inflation preview: Gold remains key asset to watch

Technical analysis

Unless bouncing back beyond 73.20, comprising early May lows, USD/INR bears stay on the road to the yearly low surrounding 72.20.