USD/INR extends recovery gains to 71.50, all eyes on US GDP, Indian budget

• USD/INR holds on to recovery gains amid broad US dollar strength.
• China’s coronavirus, trade headlines keep the risk-off, Fed’s inaction mostly ignored.
• India’s Union Budget is expected to unveil tax benefits, asset monetization.

USD/INR stays 0.20% positive around 71.50 during the initial hour of the Indian market’s trading session. The pair recently recovered as the US dollar regained its favorite status amid broad risk-off. Also contributing to the pair’s strength is traders’ cautious mood ahead of the Indian budget, up for publishing on February 01, Saturday.

China’s coronavirus is expected to provide an additional burden on the dragon nation’s economic growth that’s already near the 20-year low, as per the government official from Beijing. The fatal virus has taken 170 lives so far, all from China, while also infecting more than 7,700 people. To avoid getting infected, global airlines and businesses have started stepping back from China and the same weighs on the market’s risk-tone.

Even so, the US isn’t ready to offer relief to Chinese goods’ imports and will keep its tariffs, as said by the White House Adviser.

The resulted risk aversion could be witnessed in the market’s risk barometer, namely stocks and the US 10-year treasury yields. Additionally, the US dollar also benefited due to the same, as having a risk-safety allure, while ignoring mostly bearish Fed meeting announcements.

Traders are now concerned about the preliminary reading of the US Q4 GDP and India’s annual budget. While the US GDP is expected to reprint a 2.1% growth mark, the Indian government is under severe pressure to announce measures that could help avoid the recessionary fears. As per the latest market speculations, the Bhartiya Janata Party-led (BJP) government will announce tax measures for the middle-income group, open the economic borders a bit more for the international investors while also trying to sell assets in order to meet the fiscal gap.

Technical Analysis

21, 50 and 100-day SMA together offer strong support to the pair around 71.25/30 whereas 71.70 holds the key to pair’s run-up towards 72.00.