FUNDAMENTAL
OVERVIEW
USD:
The US
dollar sold off across the board today after Trump announced on Truth Social a
two-sided ceasefire agreement for two weeks while the US and Iran negotiate a
lasting peace deal. The discussions will begin on Friday in Islamabad and may
be extended if both parties agree.
Given the
de-escalation, the risk sentiment in the markets turned around quickly and risk
assets got heavily bid. As you would expect, traders went back to price in rate
cuts for the Fed with now 14 bps of easing expected by year-end compared to
basically zero before the ceasefire announcement.
There’s
still a risk that the war could restart any time as the US and Iran haven’t
officially ended the hostilities. Nonetheless, the bias has now turned bearish
for the dollar as traders look forward to a lasting peace deal.
INR:
The Indian rupee opened
higher today mainly because of the US Dollar weakness and the better risk
sentiment.
The RBI held
interest rates steady today at 5.25% and downgraded growth forecasts due to the
US-Iran war. In fact, 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.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily
chart, we can see that USDINR fell below the upper bound of the channel opening the door for a
bigger correction. The sellers will likely pile 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 resistance zone around the 93.50 level and the upper
bound of the channel. We can expect the sellers to step in around the
resistance with a defined risk above the top trendline to keep pushing into new
lows. The buyers, on the other hand, will look for a break above the top
trendline to pile in for a rally into new highs.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here but we have a downward trendline adding
confluence to the resistance which could give the sellers more conviction to
target new lows. Tomorrow, we get the US PCE price
index and the latest US Jobless Claims figures. On Friday, we conclude the week
with the US CPI report and the University of Michigan Consumer Sentiment
survey
