FUNDAMENTAL
OVERVIEW
USD:
The US
dollar strengthened across the board heading into the weekend as traders hedged
on risks of a potential ground invasion. This morning, we are seeing some
weakness as those hedges get unwound.
The focus
remains solely on the US-Iran negotiations and there’s some cautious optimism
as Pakistan confirmed that negotiations
may take place in Islamabad in the coming days and Trump said that they are performing
extremely well and they could make a deal pretty soon, although he
added that they might fail as well.
The path
of least resistance for the dollar remains to the upside. Traders will keep a
watchful eye on the headlines and especially on Trump’s Truth Social account,
as we are always one post away from huge market moves.
Traders
are not pricing in any change to interest rates this year as we have just 5 bps
of tightening expected by year-end.
INR:
The Indian rupee opened
higher today after the RBI
capped the open positions banks can hold in the onshore currency
market at $100 million at the end of each trading day. This measure was announced
on Friday after market close.
The central bank
continues to intervene in the market but with no avail. In fact, the gains were
quickly faded, and the rupee is now trading around Friday levels again.
Traders continue
to focus on the US-Iran negotiations and the risks of further escalation. If we
do get an escalation like a ground invasion, then we will likely see the USDINR
pair skyrocketing again. On the other hand, if the US and Iran reach a deal or Trump
decides to pull back militarily and end the hostilities, then we should get a
meaningful correction.
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 opened near the upper bound of the broken channel and rose immediately as dip-buyers quickly piled in to fade the intervention. If the price falls
back to the upper bound of the channel, we can expect the buyers to step in to
keep pushing into new highs. The sellers will need the price to fall below the upper
bound of the channel to regain some control and target a bigger correction into
the lower bound of the channel.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we can see how quickly traders faded the RBI’s intervention once again.
The price is now trading right around Friday’s levels. We can expect the
sellers to step in here with a defined risk above the highs to position for a
drop back into the upper bound of the channel. The buyers, on the other hand,
will look for a break higher to increase the bullish bets into new highs.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here as the sellers will look for a pullback
into the lower bound of the channel, while the buyers will target a break.
UPCOMING CATALYSTS
Today we have Fed Chair Powell speaking. Tomorrow, we get the US Consumer
Confidence and US Job Openings data. On Wednesday, we have the US ADP, the US
Retail Sales and the US ISM Manufacturing PMI. On Thursday, we get the latest
US Jobless Claims figures. On Friday, we conclude the week with the US NFP
report.
This article was written by Giuseppe Dellamotta at investinglive.com.
