• USD/INR snaps two-day downtrend, stays inside the 50-pip trading range.
• Risk-off mood puts a safe-haven bid under the US dollar.
• India’s active cases drop to the lowest since March but global pessimism prevails.
• US Retail Sales, Powell’s speech eyed for fresh impulse.

USD/INR takes the bids around 74.23, up 0.10% intraday, amid early Tuesday. The Indian rupee (INR) tracks the general risk-off tone that backs the USD to snap a two-day downtrend by the press time.

The fears of the virus-led challenges to the economic recovery from the pandemic gain an upper hand over other catalysts contributing to the latest risk-off mood. New Zealand becomes the last one to spark the covid resurgence woes and recently propelled the greenback, due to its safe-haven demand.

It should be noted, however, that India’s active coronavirus cases fall to the lowest since late March per data for Monday, as per Reuters. That said, the daily infections rise 25,166 and the covid-led fatalities eased to 437.

On a different page, the Indian government’s qualitative measures to boost the economy, coupled with the Reserve Bank of India’s (RBI) push for fiscal relief packages, also weigh on the INR.

Furthermore, downbeat data from China and the US, as well as the Taliban’s takeover of Kabul also add to the downbeat sentiment.

Amid these plays, US 10-year Treasury yields pause after a two-day fall whereas the US stock futures print mild losses. At home, the BSE Sensex remains directionless amid mixed performance of Asia-Pacific shares and Wall Street’s failures to provide any clear signals.

Looking forward, USD/INR traders need to keep their eyes on the risk catalysts for fresh impulse. Also important will be US Retail Sales for July, expected -0.2% versus +0.6% prior, will be the key, followed by a speech from Fed Chair Jerome Powell at an online town hall event.

Also read: US Retail Sales Preview: Dollar booster? Low expectations, market mood point to a clear reaction

Technical analysis

Although a daily closing below 50-DMA, around 74.25, keeps USD/INR sellers hopeful, a clear break of the late June’s low surrounding the 74.00 threshold becomes necessary for the bears’ conviction. It’s worth noting that a descending trend line from July 20, near 74.40, adds to the upside filters.