FUNDAMENTAL
OVERVIEW
USD:
The US
dollar extended the losses on Friday following a barrage of positive news on
the US-Iran front that seemed to point to an imminent deal after Iran announced
the reopening of the Strait of Hormuz.
The
greenback eventually erased the losses heading into the weekend after Trump
said that the US would keep the blockade of the Strait of Hormuz in place until
a deal with Iran was finalized. Traders might have hedged into the weekend due
the risk of an escalation. This is exactly what happened as Iran reclosed the
Strait in retaliation to the US blockade.
The good
news is that the ceasefire is still holding and we are still getting reports of
talks and preference for a diplomatic resolution which is keeping the markets
afloat. The bad news is that the ceasefire expires tomorrow unless we get
another extension which is what the market expects given Trump’s track
record.
The price
action continues to be driven by US-Iran headlines and this is unlikely to
change until we get an official resolution.
INR:
The Indian rupee stabilised
in the past couple of weeks as the risk-on sentiment amid the US-Iran deal
optimism gave the currency a reprieve. The focus remains on US-Iran
negotiations as everything hinges on their outcome, although the renewed
tensions are keeping the risk mood a bit on the defensive.
In terms of macro,
the RBI held interest rates steady at 5.25% and downgraded growth forecasts due
to the US-Iran war at the last policy meeting. The central bank expects
inflation to increase in the short-term and growth to slow down.
In the big
picture, the Indian Rupee remains on a bearish structural trend against the US dollar,
so the dip-buyers will likely look for opportunities around strong technical
levels to keep pushing into new highs, but for now the Rupee could remain
supported and extend the relief rally in case the US-Iran war ends.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDINR – daily
On the daily
chart, we can see that USDINR extended the fall on US-Iran optimism last week but then rebounded
late Friday on some hedging into the weekend. The target for the sellers remains
the lower bound of the channel but if we get a pullback into the upper bound of
the channel, we can expect the sellers to step in there again to position for
new lows. The buyers, on the other hand, will need a break above the upper
bound of the channel to open the door for new highs.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDINR – 4 hour
On the 4 hour
chart, we have a minor downward trendline acting as resistance. The sellers
will likely continue to lean on the trendline to keep pushing into new lows,
while the buyers will look for a break higher to pile in to extend the rebound
into the upper bound of the channel.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDINR – 1 hour
On the 1 hour
chart, there’s not much we can add here as the sellers will likely continue to
lean on the trendline, while the buyers will look to extend the rally into the
94.00 resistance in case of a breakout.
UPCOMING CATALYSTS
Tomorrow we have the US Retail Sales. On Thursday, we get the latest US Jobless
Claims figures and the US PMIs. The focus remains on US-Iran headlines ahead of
the ceasefire deadline tomorrow.
