FUNDAMENTAL
OVERVIEW
USD:
The US
dollar rallied across the board on safe haven demand as US-Iran conflict
erupted over the weekend. The main driver though was the market’s realisation
that rate cuts might not come as soon as expected.
In fact,
higher oil prices will eventually put upward pressure on inflation and Monday’s
ISM Manufacturing PMI showed how wrong
the market has been in being so dovish on the economy. The data was hot for the
second consecutive month, so the one-off narrative was put to rest.
Moreover,
the prices index jumped to the highest level since 2022, in another sign that
inflationary pressures remain high. Traders pared back their rate cut bets this
week with the total easing by year-end now seen around 44 bps vs 58 bps on
Friday.
INR:
In the big picture,
the Indian Rupee remains on a bearish structural trend against the US dollar. This
week, the bearish momentum increased substantially due to strong risk aversion
in the markets.
Moreover, supply
disruptions through the Strait of Hormuz and a renewed surge in global oil
prices led traders to expect a negative impact to the Indian economy. In fact,
almost 90% of India’s crude oil requirement is imported and 55% comes from the Middle
East.
A de-escalation
could give the INR a boost in the short-term which will likely be a good opportunity
for traders to buy the dip in the USDINR pair as the main uptrend will likely
remain intact.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily
chart, we can see that USDINR has been creeping up slowly as dip-buyers started to pile in near
the lower bound of the channel and exploded this week as the US-Iran war erupted
over the weekend. The target remains the top trendline around the 93.00 handle.
That’s where we can expect the sellers to step in with a defined risk above the
upper bound of the channel to position for a drop back into the bottom
trendline. The buyers, on the other hand, will look for a break higher to
increase the bullish bets into new highs.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we can see the price broke through the previous record high today and
pulled back as the sellers stepped in. There’s not much we can glean from this timeframe,
so we need to zoom in to see some more details.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, we can see an upward trendline defining the bullish momentum. The buyers
will likely continue to lean on the trendline with a defined risk below it to
keep pushing into the 93.00 handle. The sellers, on the other hand, will look for
a break lower to pile in for a pullback into the 91.00 handle next.
UPCOMING CATALYSTS
Today we have the US ADP and the US ISM Services PMI. Tomorrow, we get the
latest US Jobless Claims figures. On Friday, we conclude the week with the US
NFP report. The data might not matter much this week amid the US-Iran conflict
though.
This article was written by Giuseppe Dellamotta at investinglive.com.
