USD/INR remains under pressure as US-China tussle dominates Asia

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  • USD/INR stays on the back foot as US-China headlines, concerning Hong Kong, keep the risk-tone heavy.
  • Broad USD strength, Fed’s optimism also weigh on the pair.
  • FOMC minutes, trade headlines will be observed to question a weeklong triangle.

Given the US-China jitters’ negative impact on Asian markets, not to forget the overall risk-tone, the USD/INR pair extends the previous day’s downpour to 71.70 while heading into the European open on Wednesday.

The quote recently came under pressure as negotiators from the United States (US) and China keep jostling over the trade with the latest roadblock being tariff reversal. The US President Donald Trump keeps using threats to push China towards a deal.

Also deteriorating the sentiment is the on-going protests in Hong Kong. While geopolitical tension in Asia can be considered as an outcome of the weeklong demonstration, the US passing of a bill to support the protesters, followed by a harsh response from Hong Kong and China, seems to weigh on odds of a successful deal between the world’s top two economies. Additionally, doubts over the Indian economic growth, as recently covered by Moody’s, also drag the pair downwards off-late. As a result, the bonds of the US and Indian governments stretch the latest declines while Asian equities also weaken by the press time.

On the contrary, another rate cut from China’s central bank, the People’s Bank of China (PBOC), as well as the Indian government’s readiness to sustain 3.3% of fiscal deficit, contradicts the recent weakness.

While a light economic calendar could keep the market’s focus on the trade/political headlines, minute of the Federal Open Market Committee’s (FOMC) latest monetary policy meeting will entertain the traders afterward. After fresh odds of monetary policy normalization at the US Federal Reserve (Fed), recent comments from the central bank decision-makers have been quite upbeat. As a result, investors will look for signs of any upbeat statements to extend the US dollar (USD) strength.

Technical Analysis

A one-week-old triangle between 71.58 and 72.10 seems to limit the pair’s near-term moves.

 

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