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  • USD/INR drops for the sixth consecutive day while refreshing the lowest since March 2020.
  • Risk reversals suggest a lack of bearish bias.
  • RBI Governor says inflation targeting coming “very very” soon.
  • Bulls eye US dollar recovery for fresh run-up, Powell’s testimony 2.0, stimulus awaited.

USD/INR licks its wounds around 72.35 after bouncing off 72.31, the lowest in 11 months, during the initial Indian session on Wednesday. In doing so, the Indian rupee pair favors the bears for the sixth day even as the US dollar extends the previous day’s corrective pullback.

Also challenging the quote’s further weakness is the one-month ratio of calls to puts, known as risk-reversal. Risk reversals traded at +0.0025  in favor of calls or bullish bets during the early Wednesday, the one-week high, according to data provided by Reuters. The positive reading indicates call options are drawing higher premium (option price) than put or bearish bets. In other words, the options market is most bullish in a week despite the latest weakness in the quote.

It should be noted that the recent comments from RBI Governor Shaktikanta Das also raise doubts on the further downside of USD/INR. In his interview with CNBC, the RBI Chief said, “Inflation targeting report should be out very very shortly in next few days.”

The halt in the rally of the global treasury yields as well as hopes of US stimulus to be discussed this week also likely to challenge the USD/INR south-run.

Hence, traders should keep their eyes on further developments that can extend the US dollar’s latest recovery moves. That said, the US dollar index (DXY) picks up bids near 90.13 after bouncing off the six-week low of 89.94 the previous day.

Technical analysis

Unless providing a daily closing beyond 72.76, comprising September 2020 low, USD/INR bulls should remain cautious.

 

Expert score

5

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