FUNDAMENTAL
OVERVIEW
USD:
The US dollar bounced back this week as US-Iran risks resurfaced after both
parties exchanged attacks.
The US launched a series of strikes on Iran in response to Iranian attacks
on three vessels in the Strait of Hormuz. Iran retaliated by bombing US bases
in Bahrain and Kuwait, warning of further strikes if the US continued.
It was looking like the usual limited escalation we got used to in the past
months, but everything changed when Trump said to reporters at the NATO summit
in Turkey that the Memorandum of Understanding was over for him and he didn’t
want to engage with them anymore.
Oil prices jumped further and inflation worries returned. This triggered a
hawkish repricing in interest rate expectations across the board. The chances
for a July hike jumped to 34% (was 25% yesterday) and the total tightening by
year-end increased to 38 bps (was 30 bps yesterday).
INR:
On the INR side, the
Rupee started to fall again in recent weeks as the market focus shifted from
oil prices to Fed tightening risks after the last FOMC decision. The tight correlation
with oil prices has returned this week following the US-Iran escalation in the
Strait of Hormuz.
Today, the Rupee’s
slide accelerated as oil prices spiked hard after Trump said that the Memorandum
of Understanding with Iran was over for him and he didn’t want to engage with
them anymore.
In the big
picture, the Indian Rupee remains on a bearish structural trend against the US dollar,
so dip-buyers will continue to look for opportunities around strong technical
levels to keep pushing the USD/INR pair into new highs.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDINR – daily
On the daily
chart, we can see that USDINR is approaching the first key resistance zone around the 96.10 level.
If the price gets there, we can expect the sellers to step in with a defined
risk above the resistance to position for a drop back into the 94.00 level. The
buyers, on the other hand, will look for a break to increase the bullish bets
into the record highs around the 97.33 level.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDINR – 4 hour
On the 4 hour
chart, we can see the price retested the broken resistance turned support
around the 95.10 level and rallied into new highs following the US-Iran escalation.
We now have an upward trendline defining the bullish structure. If the price falls
into the trendline, we can expect the buyers to lean on it with a defined risk
below it to keep pushing into new highs. The sellers, on the other hand, will
look for a break to pile in for a drop into new lows.
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 have a better risk
to reward setup around the 96.10 resistance, while the buyers will either wait
for a break above the resistance or a pullback into the trendline.
UPCOMING CATALYSTS
Today, we have the FOMC
meeting minutes. Tomorrow, we get the latest US Jobless Claims figures.
