FUNDAMENTAL
OVERVIEW
USD:
The US dollar weakened across the board on Friday following a softer than expected
NFP report, with the headline showing negative payroll
growth and average hourly earnings missing forecasts by a notable margin.
The data triggered a dovish repricing in interest rate expectations, with
the probability of a September rate hike falling to 38%, compared with 54%
before the release. Market pricing has normalised since then, with the
probability of a September hike rising back to 48%.
The reason for this whipsaw in expectations is that there was a significant
loss of government jobs, which made the report look much softer than it
actually was. The unemployment rate painted a different picture, falling
further to 4.1%. Overall, the labour market remains on a better trajectory than
it has been over the past three years.
The next major event will be the US CPI report on Wednesday. The data will
be critical for the September FOMC decision and the Jackson Hole Symposium.
A hot report will likely trigger a rally in the US dollar, with traders increasing
rate hike bets. A soft report, on the other hand, should reduce further the
risk of Fed tightening and put more pressure on the greenback
INR:
On the INR side, the
bullish momentum has waned as the US-Iran deal failed to materialise within the
expected timeline. Nevertheless, the lack of US attacks on Iran keeps the hopes
alive.
The RBI left the
repo rate unchanged at 5.25% maintaining the neutral stance. Governor Malhotra stressed
data dependence and said that they are neither hawkish nor dovish. The lack of
hawkish guidance likely weighed further on the rupee.
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
On the daily
chart, we can see that USDINRbounced again around the key 95.10 support zone as the buyers
stepped in with a defined risk below the support to position for a rally back
into the 96.10 resistance. The sellers will need the price to break below the
95.10 support to open the door for a drop into the 94.00 handle next.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we can see the price is now consolidating between the 95.10 support and
the 95.60 resistance. The market participants will likely continue to play the
range until we get a breakout on either side.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here as the buyers will continue to step in
around the 95.10 support and wait for a break above the 95.60 resistance to
increase the bullish bets. The sellers, on the other hand, will likely lean on
the 95.60 resistance to keep pushing into new lows and wait for a break below
the 95.10 support to increase the bearish bets into new lows.
UPCOMING CATALYSTS
On Wednesday,
we have the Indian and the US CPI reports. On Thursday, we get the US PPI data
and the latest US Jobless Claims figures. On Friday, we conclude the week with
the US Retail Sales and the University of Michigan Consumer Sentiment report.
This article was written by Giuseppe Dellamotta at investinglive.com.
