FUNDAMENTAL
OVERVIEW
USD:
The US
dollar has been on the backfoot since Monday as the positive US-Iran deal
expectations kept weighing on the greenback. The second round of negotiations were
expected to begin today but we never had an official date. They are expected to
happen before the April 22 ceasefire deadline though.
In the
meantime, we got reports that US and Iranian negotiators made
progress in talks on Tuesday and they were moving closer to a framework
agreement to end the war. A US official has also mentioned that if a framework
agreement is reached, the ceasefire would need to be extended to negotiate the
details of a comprehensive deal.
Everything
now hinges on US-Iran talks. If negotiations were to break down again, we might
see a short-term rally in the greenback, but as long as the ceasefire holds,
the upside could remain limited. On the other hand, a peace deal might see the
dollar extending the losses although a “sell the fact” type of reaction remains
a risk.
The market
is now pricing in 10 bps of easing by year-end and that might increase on a
peace deal. I think the market might get disappointed further down the road as
the boost to economic activity amid a resilient labour market and rate cut
expectations will likely keep inflation above the 2% target and the Fed on the
sidelines.
INR:
The Indian rupee stabilised
recently 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.
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
On the daily
chart, we can see that USDINR fell below the upper bound of the channel and started to
consolidate. The sellers are stepping in around the top trendline to extend the
drop into the lower bound of the channel. The buyers, on the other hand, will
want to see the price rising back above the top trendline to increase the
bullish bets into new highs.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we have a minor upward trendline acting as support. The buyers continue
to step in around the trendline with a defined risk below it to keep pushing
into new highs. The sellers, on the other hand, will look for a break lower to
increase the bearish bets into new lows.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, we can see more clearly the consolidation between the minor upward trendline
and the resistance zone around the 94.00 handle
