The USDINR spot opened the week on a weaker note after the anxiously awaited US May non-farm payrolls report missed the market’s expectations. The non-farm payrolls increased by 559,000 in May, compared to 650,000 forecasts by Reuters. The real disappointment stemmed as jobs data fell short relative to the ADP (NASDAQ:ADP) report, which had activated the dollar bulls to get ahead of themselves, predicting the NFP report. But the jobs data eased some fears about the US economy running too hot and stoking troublesome inflation. It showed that the US recovery is on track and provided a sweet spot for risk sentiment as it alleviated the pressure that the Fed may have to consider tapering sooner rather than later.

Looking ahead this week, the focus will be on the US inflation figures which are due on Thursday. The data will provide an insight into just how short-term growing price pressures may be. Reuters expect the headline to jump to 4.7% year-on-year from 4.2% in April. The Fed’s stance on inflation will be tested yet again if it rises to 4.7%, spurring the taper talk with a renewed bid in the USD/INR. Although, another miss of lofty CPI forecasts might clear the way for further dollar declines.

Along with that, fx traders will look out for the European Central Bank meeting outcome due on Thursday. The eurozone outlook is gradually improving and the financial conditions are also still broadly conducive to the recovery, so the ECB policy will be interesting to watch. But broadly, the USDINR bears can pass unscathed through super Thursday of US CPI and the ECB policy decision. The dollar could stay gently offered into the major event risk of the month which is the FOMC decision.

Technically, the strong support zone is located at 72.60/72.50 and we can see a dip only if the spot consistent trades below 72.50. The fall can continue towards 72.25-72.0-71.80. Meanwhile, on the upside, 73.0-73.30 is a crucial resistance zone above which the next resistance is at 73.60-73.75.

Published in Investing.com