FUNDAMENTAL
OVERVIEW
USD:
The US dollar regained some ground as both Trump and Iran rejected the respective war-ending proposals calling them unacceptable and leaving the two sides miles apart on any
potential agreement. Moreover, Israeli PM Netanyahu confirmed that the removal
of Iranian nuclear material remains an active war priority, and separate
reports indicated that Trump told Netanyahu directly he wants to go in on
Iranian nuclear sites.
This kind of headline noise has been going on for several weeks and kept
the price action in rangebound mode as traders continued to wait for new
developments before picking a direction.
Looking ahead, the Fed is slowly abandoning the easing bias amid resilient
US data and elevated energy prices. The reopening of the Strait could weigh on
the greenback in the short-term as oil prices will likely crater and rate cut
bets will increase.
After that though, the focus will quickly turn back to the Fed and the
economic data. With the end of the war, the increase in economic activity could
keep inflation higher for longer and eventually even require rate hikes to
bring it sustainably back to the 2% target that the Fed has been missing since
2021.
There’s also another scenario where the Strait remains closed for longer
and oil prices stay elevated with the risk that the Fed turns hawkish and gives
the greenback a strong boost given the bearish positioning on the dollar.
INR:
On the INR side, the
lack of US-Iran breakthrough and some minor escalations in the Strait of Hormuz
weighed on the Indian Rupee which eventually erased most of last week’s gains.
In the short-term,
the Rupee has been closely correlated with oil prices, so positive developments
on the US-Iran front should keep giving the INR a boost. Conversely, further
escalations will likely keep weighing on the currency and push it into new
record lows.
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.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDINR – daily
On the daily
chart, we can see that since the bounce on the upper bound of the channel, the USDINR pair has almost recovered all last week’s losses. The natural target
is the resistance zone around the 96.00 handle. That’s where we can expect the
sellers to step in with a defined risk above the resistance to position for a drop
back into the upper bound of the channel. The buyers, on the other hand, will
look for a breakout to increase the bullish bets into new record highs.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDINR – 4 hour
On the 4 hour
chart, there’s not much we can see here as the key levels remain the resistance
around the 96.00 handle and the support around the upper bound of the channel.
We need to zoom in to see some more details.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDINR – 1 hour
On the 1 hour
chart, we now have a minor upward trendline defining the current bullish
momentum. If we get a pullback, we can expect the buyers to lean on the trendline
with a defined risk below it to keep pushing into new all-time highs. The
sellers, on the other hand, will look for a break lower to extend the pullback
into the upper bound of the channel.
UPCOMING CATALYSTS
Tomorrow we get Indian and US inflation reports. On Wednesday, we have the US PPI data. On
Thursday, we get the US Retail Sales report and the latest US Jobless Claims
figures.
