FUNDAMENTAL
OVERVIEW
USD:
The US dollar regained some ground this week as US and Iran rejected the
respective war-ending proposals and US inflation data came out higher than
expected. Overall, the market remains rangebound as traders continue to wait
for new developments before picking a direction.
Looking ahead, the Fed is slowly abandoning the easing bias with more and
more policymakers talking about the need of keeping all options on the table
and some explicitly bringing up rate hikes.
The reopening of the Strait could weigh on the greenback in the short-term
as oil prices will likely fall quickly and rate cut bets will increase on
easing inflation worries.
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 anyway
and gives the greenback a strong boost given the bearish positioning on the
dollar.
INR:
On the INR side, the
lack of any US-Iran breakthrough and a rebound in oil prices continued to weigh
on the Indian Rupee which dropped to a new record low against the dollar this
week.
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, extended
stalemate or 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
On the daily
chart, we can see that USDINR reached a new record high this week as the Rupee slide extended
further. The price is now consolidating around the all-time highs, so there’s
not much we can see here. We need to zoom in to see some more details.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we can see more clearly the consolidation around the all-time highs. From
a risk management perspective, the buyers will have a better risk to reward
setup around the trendline to keep pushing into new highs. The sellers, on the
other hand, will need a break below the trendline and the upper bound of the
channel to open the door for new lows.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, we have a tight range between the 95.65 support and 96.20 resistance. The
buyers will continue to step in around the support to keep pushing into new
highs and increase the bullish bets on a break above the resistance
