• USD/INR pares recent losses amid holiday in India, cautious mood ahead of key US data.
• Mixed sentiment restricts market moves as traders await US Q4 GDP, PCE Price data.
• Odds favoring higher foreign fund inflow and softer Oil price favor INR buyers.
• Concerns surrounding Fed’s pivot keep US Dollar on a dicey floor.

USD/INR retreats to 81.45 while paring the intraday gains during early Thursday. The Indian Rupee (INR) pair initially reacted to the US Dollar’s corrective bounce ahead of the key data but price-positive signals for the INR joined Indian holidays to recall the bears.

That said, the US Dollar Index (DXY) bears take a breather around an eight-month low as traders await the first readings of the US fourth quarter (Q4) Gross Domestic Product (GDP), expected to print annualized growth of 2.6% versus 3.2% prior. Also important are the US Durable Goods Orders for December and the Q4 Personal Consumption Expenditure (PCE) Price data.

It’s worth noting that the downbeat US Treasury yields and hawkish bets on the European Central Bank (ECB), versus the recently increasing odds favoring the Fed’s policy pivot, seem to exert downside pressure on the DXY. “Traders broadly expect the Fed to increase rates by 25 basis points (bps) next Wednesday, a step down from a 50 bps increase in December,” said Reuters.

Elsewhere, the expected jump in the Indian foreign fund inflow due to the Adani Enterprise offerings joins the recently easing WTI crude oil prices to weigh on the USD/INR prices. That said, the WTI crude oil drops nearly half a percent to $80.30 by the press time.

On the other hand, the hopes of more public sector demands and importers’ moves, as well as the Reserve Bank of India’s (RBI) actions, could weigh on the INR.

Given the Republic Day holiday in India, USD/INR is likely to witness a more sluggish day ahead, in addition to the pre-data anxiety. That said, the downbeat expectations from the scheduled US data keep the pair sellers hopeful but a positive surprise could trigger a notable reaction ahead of the next week’s Federal Open Market Committee (FOMC) meeting.

Also read: US Gross Domestic Product Preview: Three reasons to expect a US Dollar-boosting outcome

Technical analysis

A two-week-old bearish channel restricts USD/INR moves between 80.80 and 81.75 at the latest.