The week started on a sharp rally in the USDINR spot. The escalation in the already simmering Indo-China border tensions has led to strong buying pressure in the USDINR spot. All this while optimism that central banks and governments all over the world will continue supporting the growth by infusing additional stimulus pushed the spot sharply to a six month low of 73.25. However, the border war angst and worries over rising coronavirus cases held back the dollar bears. The Chinese People’s Liberation Army (PLA) troops have violated the previous consensus arrived at during military and diplomatic engagements during the ongoing standoff in eastern Ladakh and carried out provocative military movements to change the status quo.
Last time, traders had turned a blind eye to the Indo-China tiff and had focused on the easing lockdown. However, this time there is a resurgence of COVID-19 cases and raised worries of economic growth. The virus has infected over 250.51 lakh people and caused around 8.43 lakh deaths globally. In India, the confirmed cases jumped to 35.42 lakh and the death toll mounted to 63,498 so far.
On the global front, as we near the US Presidential elections and with the respective party national conventions over, traders focus will be on the election polls this week. Trump continues to trail against Biden. However, Trump may look to push the US-China trade tensions in-order to narrow the gap with Biden. China’s retaliation may lead to risk aversion and push the USDINR spot even higher.
Technically, the immediate resistance inn the USDINR spot lies at 73.75 and crucial resistance is observed at 74.0. If the pair sustains above 74.0 then doors will be open for 74.50/74.75. On the downside, crucial support is located at 73.25-72.90 and consistent trading below the 72.90 mark only we can see further correction towards 72.60-72.40. However, geopolitical tensions will keep any fall in the USDINR spot under check. The 74 level is a crucial resistance, consistent trading above that will trigger an upside move, while, 73.25 will act as strong support.