USD/INR stays around yearly top despite lingering trade worries

• USD/INR clings to the year top as investors shrug-off the US-China trade war concerns amid domestic and extended headwinds.
• Moody’s revised down 2019 GDP forecasts.
• RBI accepts Jalan Committee’s recommendation.

Despite failing to cross the yearly top, flashed at the week’s start, USD/INR takes the bids to 71.85 by the press time of early Tuesday.

While receding trade tension between the US and China fuelled the pair to the year’s top, traders showed little reaction to the latest pessimism amid mixed headlines and fresh multi-year drop of the Chinese Yuan (CNY).

The reason could be global rating agency Moody’s anticipation of a lower growth rate in 2019 to 6.2% from the earlier projection of 6.8%. Adding to the pessimism, the Reserve Bank of India’s (RBI) accepted Jalan Committee report based on eight month’s research on the central bank’s capital framework, assessment of excess capital and ability to pay a dividend to the government.

“The Committee’s recommendation on one-time excess capital transfer was at the lower end of market expectations, which had swung over the past six months from a staggered transfer of c.INR 3.6-4tn over three to five years to almost no transfer”, conveys Standard Chartered.

Investors will now keep an eye over second-tier consumer sentiment and manufacturing activity data from the US, coupled with trade/political headlines, amid a thin economic calendar.

Technical Analysis

Unless prices dip below a nine-day-old rising trend-line, at 71.58 now, chances of an additional run-up to December 2018 top surrounding 72.82 can’t be denied. In a case of the quote’s decline below 71.58, 21-day exponential moving average (EMA) level of 71.00 and August 08 low near 70.36 can please sellers.