USD/INR hits highest since Dec. 17, eyes 100-day MA hurdle

• USD/INR has hit 7-week highs and could rise further on India's fiscal concerns and oil rally.
• A break above 100-day MA could yield a sustained move toward 72.50.

The USD/INR is currently trading at71.67 - the highest level since Dec. 17 - and could soon test the 100-day moving average (MA) lined up at 71.80.

The Indian unit is on the defensive possibly due to India's fiscal concerns. The Indian government delivered a populist budget last week, which is seen widening its fiscal deficit targets for the current and next financial year. Ratings agency Moody's has said that the nation's inability to meet fiscal deficit target for four consecutive years as a big "credit negative".

Meanwhile, crude prices have closed last week at the highest level since mid-November and are seen rising further on tightening supplies. That could add to the bearish pressure around the rupee. 

Further, the US non-farm payrolls data for January bettered estimates by a big margin, helping the dollar regain some poise against majors. The greenback could pick up a strong bid later in the week if the fourth quarter unit labor cost prints well above estimates, forcing markets to reassess Fed's recent dovish turn.

All-in-all, the USD/INR looks set to test the 100-day MA lined up near 71.80. A break higher would open up upside toward 72.55 (Dec. 10 high).

Technical Levels