FUNDAMENTAL
OVERVIEW
USD:
The US
Dollar rebounded in the final part of last week with analysts pointing to the
nomination of Kevin Warsh as the next Fed chair as the main catalyst. The
reality is that the strong selloff in the greenback wasn’t backed by
fundamentals in the first place. The greenback didn’t have strong reasons to
appreciate, but there wasn’t a reason for a strong selloff either.
The US
data continues to improve, especially on the labour market side as the US
Jobless Claims suggest a re-acceleration in activity. Yesterday’s US ISM
Manufacturing PMI beat expectations by a big margin with the new orders
index jumping to the best levels since 2022. February might be the month when
the US Dollar comes back with a vengeance if we keep getting strong data.
The NFP
report is certainly the main highlight although it got delayed due to the
partial shutdown. Nonetheless, we will get many other top tier data that could
give the greenback a boost like the US ADP and the ISM Services PMI.
The market
is pricing 48 bps of easing by year-end and those bets will be pared back in
case the data strengthens. Conversely, if the data comes out softer than
expected, then we could see the US Dollar coming back under pressure, although
the momentum shouldn’t be as strong as we’ve seen in January.
INR:
The Indian Rupee remains
on a bearish structural trend against the US Dollar, but the latest positive
development on the tariffs front gave the INR a strong boost. In fact, US President Trump announced yesterday on Truth Social that they reached a deal with India and the US will
lower the tariffs from 25% to 18%.
This week, we have
also the RBI rate decision on Friday where the central bank is expected to hold
interest rates steady after inflation increased to 1.33% in December vs 0.71%
in November and analysts expecting further improvement towards the RBI’s
target.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDINR – daily
On the daily
chart, we can see that USDINR eventually dropped from the upper bound of the channel and it’s now
getting closer to the bottom trendline. We can expect the buyers to step in
around the bottom trendline with a defined risk below it to position for a
rally into the top trendline. The sellers, on the other hand, will look for a
break lower to increase the bearish bets into the 89.00 handle next.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDINR – 4 hour
On the 4 hour
chart, we can see more clearly the selloff in the pair triggered by the
positive US-India developments. A break below the bottom trendline should open
the door for a move into the swing level at 89.50 which could be the last line
of defence for the buyers as a break below that level could change the
medium-term trend.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDINR – 1 hour
On the 1 hour
chart, we can see that we have a minor downward trendline defining the bearish
momentum. If we get a pullback, we can expect the sellers to lean on the
trendline with a defined risk above it to keep pushing into new lows. The
buyers, on the other hand, will look for a break higher to increase the bullish
bets into the 91.42 level next.
UPCOMING CATALYSTS
Tomorrow the US ADP and the US ISM Services PMI. On Thursday, we get the US
Jobless Claims figures. On Friday, we conclude the week with the RBI rate
decision and the University of Michigan Consumer Sentiment data.
