• USD/INR steps back from intraday top, stays on the consolidation mode.
• Options market suggests the strongest bullish bias in over a week.
• US dollar struggles amid retreating US Treasury yields, pre-Fed caution.
• India Trade Deficit, US Retail Sales will decorate calendar, FOMC becomes the key.

USD/INR reverses the early Asian gains while dropping back to 73.18 as Indian traders begin Tuesday’s work. The Indian rupee (INR) pair refreshed one-week top on Friday before stepping back from 100-day SMA afterward. In doing so, the quote reacts to the US dollar moves amid cautious sentiment ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting.

The pair recently takes clues from the US Treasury yields as they snap a two-day uptrend and weigh on the US dollar. That said, the US dollar index (DXY) refreshes intraday low to 90.47, down 0.04% on a day, by the press time. With the recently improving inflation expectations data from the regional Federal Reserve banks, the market’s mood remains downbeat before tomorrow’s key event.

It’s worth noting that the chatters surrounding further US-China tension and fears of Delta variant of the covid also weigh on the risk appetite.

On the contrary, hopes of further stimulus from the US and a notable increase in vaccine donations from the West, to the needy nations, battle the pessimism.

Amid these plays, S&P 500 Futures print mild gains while markets in Asia-Pacific, except for China, track mildly bid Wall Street benchmarks.

It should be observed that the USD/INR weakness doesn’t go hand-in-hand with the options market signals as the latest risk reversal, a ratio of bullish bets to bearish bets, jump to the highest since June 03.

Moving on, India’s Trade Deficit for May, expected to remain unchanged at $6.32 billion, may offer immediate direction to the USD/INR moves ahead of the US Retail Sales figures for May, expected -0.8% MoM versus 0.0% prior.

Above all, the market’s anxiety over the Fed’s next moves can keep the USD/INR range-bound ahead of Fed’s verdict.

Technical analysis

Failures to cross 100-day SMA, around 73.30, drags USD/INR towards an ascending support line from May 28, near 73.05. However, upbeat oscillators reject calls of any further downside below the 73.00 threshold.