• USDINR takes the bids to refresh intraday high and extends the week-start run-up.
• India’s retail inflation dropped to three-month low in October.
• US Dollar traces yields to defend recovery from three-month low.
• US PPI, risk catalysts eyed for fresh impulse ahead of the key US Retail Sales.

USDINR renews its intraday high around 81.35 as it extends the previous day’s recovery to early Tuesday morning in Europe. In doing so, the Indian Rupee (INR) pair cheers downbeat prints of India’s retail inflation, as well as the US Dollar’s recovery amid mixed concerns.

“India's annual retail inflation eased to 6.77% last month, helped by a slower rise in food prices, data showed on Monday,” mentioned Reuters. It’s worth noting that the outcome was higher than the 6.73% forecasts and the Reserve Bank of India’s (RBI) tolerance limit adds to the news.

The same joins broad concerns over the major central banks’ pivot to suggest a softer rate hike from the RBI, which in turn propels the Indian equities and weighs on the INR price.

On the other hand, the US Dollar Index (DXY) remains mildly bid near 107.00, extending the week-start rebound from a three-month low, as hawkish comments from the US Federal Reserve (Fed) officials underpin the recovery moves of the US Treasury yields. That said, the Fed’s Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, Michael Barr mentioned that the inflation is too high. Before that, Vice-Chair Lael Brainard favored a 50 bps rate hike but also stated, “We have additional work to do.” Earlier on Monday, Federal Reserve Governor Christopher Waller also promoted the ideal of a 0.50% rate hike while also warning against the market’s perception of the pivot.

It should be noted that the Covid fears from China and the absence of positive headlines from the first face-to-face meeting between US President Joe Biden and his Chinese counterpart Xi Jinping also challenge the market sentiment and keeps the USDINR buyers hopeful.

Against this backdrop, S&P 500 Futures print 0.50% intraday gains around the monthly high but the US 10-year Treasury yields grind higher around 3.87%.

Moving on, risk catalysts are important for the USDINR pair traders ahead of the US Producer Price Index (PPI) for October, expected at 8.3% YoY versus 8.5% prior, as well as the US Retail Sales for the said month.

Technical analysis

A 3.5-month-old ascending trend line, currently around 80.40, restricts short-term USDINR downside.