• USD/INR extends Thursday’s rally to break through the weekly resistance line.
• USD regains bullish momentum as inflation woes return to the table, raising doubts over the Fed’s rejection of a 75 basis point rate hike.
• RBI’s surprise rate hike failed to keep INR firmer amid high oil prices, market risk aversion.
• The US jobs report becomes key in hopes of bigger than expected rate hikes.

USD/INR rallies around the intraday high, holding the rebound to a three-week low, as the US Dollar rushes to risk safety ahead of Friday’s key jobs report. The weakness in the Indian Rupee (INR) pair could also be linked to firmer oil prices and challenges for China, other than what already exists for the global economy.

The U.S. dollar index (DXY) regained strength the day before after the Bank of England (BOE) reignited inflation fears, providing another catalyst to push the Fed towards bigger rate hikes than the 50 basis points (bps) already reported and integrated. , the greenback gauge has reversed post-Fed losses, currently up 0.04% near 103.60.

In addition to the return of market fears and the strength of the dollar, the strength in oil prices, mainly due to Thursday’s verdict from the OPEC+ group, comprising the countries of the Organization of the Petroleum Exporting Countries (OPEC) and their allies, including Russia. The oil cartel has announced that it will continue the current policy of increasing monthly production by 432,000 barrels per day (BPD). The European Union (EU) oil embargo on Russian imports is also supporting oil prices and weighing on risk catalysts. That said, WTI crude oil prices remain marginally higher around $107.70 at press time after refreshing from a six-week high the previous day. With India being a major oil importer and experiencing soaring budget deficits, a spike in oil prices drowns the INR.

Elsewhere, the recently pessimistic economy of Greater Asian China and Indonesia’s restriction on exports of cooking oil ingredients, which was duly raised at the last meeting of the World Trade Organization ( WTO), also propel USD/INR.

On the contrary, the heavily oversubscribed initial public offering (IPO) of the country’s largest insurer and stronger activity figures for March, as well as the rate hike of the Reserve Bank of India (RBI), call into question the USD/INR upward moves.

Amid these games, S&P 500 futures are posting slight losses and Indian indices are seeing red while 10-year US Treasury yields remain firmer around the highest levels since the end of 2018 marked the previous day. .

Next, USD/INR traders will pay attention to US employment data due to the Fed’s reluctance to raise the benchmark rate by 75 basis points (bps). That said, the US Nonfarm Payrolls (NFP) stock will drop from 431K to 391K, while the unemployment rate could also drop to 3.5% from 3.6%.

Also Read: The Bond Massacre Continues and the Fed’s Dove Rally is Already Failing

Technical analysis

USD/INR pokes a week-old resistance line around 76.65, a clean break of which will not hesitate to renew the weekly high around 77.10. The bullish bias is also pulling hints from the firmer RSI and the pair’s ability to stay above an ascending trendline from mid-January near 76.00 at press time.