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USD/INR: Bulls and bears jostle around 71.40 with eyes on Coronavirus, Indian budget

  • USD/INR pulls back from nearly three-week top flashed the previous day.
  • Global financial markets, including Asia, bear the burden of China’s coronavirus outbreak.
  • Indian budget is anticipated to unveil tax benefits while asset monetization is also likely.

USD/INR consolidates gains from the multi-day high, flashed yesterday, while declining to 71.40 ahead of the European session on Tuesday. While fears surrounding the outbreak of China’s coronavirus weigh on the trading sentiment, the Indian rupee (INR) buyers expect special reliefs from the government in the upcoming union budget, up for publishing on Saturday.

There are more than 107 confirmed deaths from the outbreak of coronavirus from China’s Wuhan city, which is locked down off-late. Additionally, more than 4,000 people are globally affected due to the epidemic that now has its traces in Germany, Japan, Sydney and the US. Chinese policymakers are on the go while the World Health Organization (WHO) also admitted the previous error of terming the global risk from the virus as “moderate” while putting it into the “high” risk category on Monday.

While portraying the market’s risk-off mood, the US 10-year treasury yields drop to early-October lows while shares in Asia follow Wall Street that flashed losses by the end of Monday. Japan’s NIKKEI loses 0.90% to 23,134 whereas India’s BSE SENSEX mark gains in the hope of economic help from the government in the union budget.

Nobel laureate and economist Abhijit Banerjee rang the alarm that the Indian economy is likely in recession. The same exerted additional pressure on the Narendra Modi-led government to take steps to ease market fears. In doing so, Saturday’s union budget is mostly expected to allow tax benefits from long-term capital gains tax and dividend distribution tax. Additionally, the government is also likely to sell some or most part of its assets to fund its capital expenditure.

It’s worth mentioning that today’s US data-points and Wednesday’s FOMC could offer intermediate moves, together with updates on coronavirus outbreak, to the pair.

Technical Analysis

Multiple bounces of 71.6550/6750 seem to portray the buyers’ reluctance in accepting the higher levels, which in turn portrays the pair’s readiness to test 71.00 and monthly low near 70.58 on the break of short-term rising support line at 71.25 now. On the upside, 71.80 and 72.00 could please the bulls during the upside.

 

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