USD/INR: Rebound stalls just below 71.00, focus on US CPI

• The Aussie recovers amid trade optimism, solid Chinese Trade data.
• Australian bushfire crisis impact continues to weigh on the AUD.
• The US dollar trades listless ahead of the US inflation data.

Amid rising stagflation risks in India and fresh broad-based US dollar buying, USD/INR staged a solid comeback from five-week lows of 70.71 reached in the overnight trades. At the press time, the spot trades at 70.93, having stalled the rebound just below the 71 handle.

The further recovery in the pair appears capped, as the Indian rupee continues to draw support from its Asian peers, the Chinese yuan, which rallied hard on the US’ goodwill gesture ahead of the US-China phase one trade deal signing on Wednesday. US to remove 'currency manipulator' tag on China ahead of the phase-one deal

The Indian rupee’s upside lost legs over the last hours after the Indian Whole Price Index (WPI) accelerated to 2.59% in December. India’s retail price index jumped to 65-month highs in December. Rising price pressures combined with slowing GDP growth poses a stagflation threat to India’s economy.  

Meanwhile, a fresh buying wave seen in the US dollar across its main competitors lifted the cross from multi-week troughs, as the bulls now gather pace for a break above the 71 handle.

That is likely if the US dollar extends the recovery gains on above-forecast US CPI data due to be reported at 1330 GMT in the NA session. The US CPI is seen rising to 15-month highs of 2.3% YoY in Dec from 2.1% previous.

USD/INR Technical levels to consider