USD/INR drops to three-week lows near 71.30 ahead of US data

• USD/INR fails to benefit from broad dollar strength amid trade hopes.
• Rupee cheers rising FI inflows, Govt’s new industrial policy announcement.
• US macro data dump eyed for next direction in the spot.

The USD/INR pair extends its three-day losing streak in Europe, having witnessed a temporary bounce to near 71.50 in early trades. The spot hit fresh three-week lows of 71.27 and now recovers to 71.33, still down -0.20% on a daily basis.

The cross fails to benefit from broad-based US dollar strength led by rising expectations of a likely US-China trade deal, especially after US President Trump’s pro-trade deal comments. The US dollar index flirts with two-week highs of 98.40, up +0.13% so far.

On the INR-side of the equation, the ongoing strength in the Rupee can be mainly attributed to the expected Foreign Investment inflows following ArcelorMittal's acquisition of Essar Steel.  Markets expect around $6 billion foreign inflow this week from the deal.

Also, firmer Indian equity markets amid trade deal optimism also collaborate to the bullish momentum in the local currency. The Indian benchmark index, the SENSEX, is back above the 14k mark, driven by the auto sector stocks.

Over the last hour, the spot is seen making some recovery attempts, as oil prices seem to have resumed their recent move up and keep a check on the rupee’s upside. Recall that India is an oil importing nation and rising oil prices have a significant negative impact on the country’s Balance of Payments (BoP).

Markets will continue to take cues from risk sentiment amid trade-related headlines while the main focus remains on the US economic releases for the next direction in the prices. The US is set to release the Q3 GDP, durable goods, core PCE price index and pending home sales data later in the NA session.

USD/INR Technical levels to consider