The Indian rupee has stalled its two-day winning streak on Wednesday and retreats from four-week highs against the US dollar.
At the time of writing, USD/INR is trading at 73.89, bouncing off four-week lows of 73.72 reached a day before.
The rebound in the cross could be attributed to the broad-based rally in the US dollar after Wall Street stocks tumbled on Treasury Secretary Janet Yellen’s rate hike remarks and lifted a safe-haven appeal of the buck.
However, the latest uptick in the cross is mainly in response to India’s growth forecast downgrade by the US banking giant, Goldman Sachs.
Goldman Sachs said “While activity is likely to rebound from Q3 (July-September) onwards — assuming restrictions can ease somewhat over that time frame — the net result is to lower our FY22 GDP growth forecast to 11.1% (from 11.7% previously), and our 2021 calendar year growth forecast to 9.7% (from 10.5%).”
India is battling the second wave of coronavirus, making it the world’s worst country in handling the covid crisis.
The daily chart of USD/INR shows that the price is due for a corrective upside, as the 50-daily moving average (DMA) looks to recapture the 200-DMA, suggesting a potential golden cross.
USD/INR daily chart
Meanwhile, the 14-day Relative Strength Index (RSI) has also rebounded from lower levels, pointing to a likely recovery on the cards.
Recapturing the 74.00 mark is critical for the bulls to unleashing additional recovery gains. Meanwhile, the downside remains cushioned by 73.65, where the 50 and 200-DMAs coincide.