FUNDAMENTAL OVERVIEW
USD:
The US dollar sold off across the board on Wednesday after Trump announced on Truth Social a two-sided ceasefire agreement for two weeks while the US and Iran negotiate a lasting peace deal. Since then, the price action became more rangebound due to Israeli attacks against Lebanon which the Iranians have been saying was part of the ceasefire agreement.
The good news is that Iran held off from retaliating ahead of the peace talks in Islamabad this weekend. But the uncertainty has been keeping the markets in check, nonetheless. Everything hinges on these peace talks as the restart of the war would create strong distress in the markets and potentially lead to a global recession.
In the short-term, a peace deal would weigh on the greenback amid renewed rate cut bets and unwinding of the March positioning. On the other hand, a breakdown of negotiations would give the dollar another boost, potentially pushing it into new highs.
INR:
The Indian rupee has finally found some reprieve recently after the ceasefire announcement, although that hasn’t completely erased the risks as the focus has now turned to the US-Iran peace talks.
The RBI this week held interest rates steady 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 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 opening the door for a bigger correction. 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 can see more clearly how the price rejected the upper bound of the channel as the sellers stepped in with a defined risk above the channel to extend the drop into new lows. The buyers will likely wait for a break higher to regain control and target new highs.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see the price action has been a real mess lately with lots of interventions and gaps. Right now, we might be trading inside a falling channel with the price rejecting the upper bound of it. We have a minor support zone around the 93.30 level.
The buyers will likely step in around the support to position for a rally into new highs, although a break above the channel would give them more conviction. The sellers, on the other hand, will look for a break below the support to increase the bearish bets into new lows.
UPCOMING CATALYSTS
Today we conclude the week with the US CPI report and the University of Michigan Consumer Sentiment survey.
