FUNDAMENTAL OVERVIEW
USD:
The US dollar strengthened a bit yesterday as traders turned more cautious heading into the expected US-Iran talks in Islamabad and the ceasefire deadline. The markets got scared at some point as it looked like the Islamabad talks were dead on arrival with Iran refusing to participate until the US blockade in the Strait of Hormuz was lifted.
The sentiment improved though after Trump extended the ceasefire deadline (unsurprisingly) to allow more time for Tehran to put forward a proposal to end the war. There's no deadline for this latest extension, so we might just get stuck in this new situation until the bombs start dropping again or they finally reach a deal.
This morning, the sentiment is a bit more positive after Tasnim reported that Iran received 'some sign' the US is ready to break the blockade which is giving traders hope that the talks are going to happen soon.
The price action continues to be driven by US-Iran headlines, and this is unlikely to change until we get an official resolution. For now, the greenback will likely remain under pressure amid the optimistic expectations.
INR:
On the INR side, nothing has changed. The Indian Rupee stabilised in the past couple of weeks as the risk-on sentiment amid the US-Iran deal optimism gave the currency a reprieve. The focus remains on US-Iran negotiations as everything hinges on their outcome, although the renewed tensions are keeping the risk mood a bit on the defensive.
In terms of macro, the RBI held interest rates steady at 5.25% and downgraded growth forecasts due to the US-Iran war at the last policy meeting. 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 pulled all the way back to the upper bound of the channel. This is where we can expect the buyers to step in with a defined risk above the channel to position for a drop into the lower bound of the channel. The buyers, on the other hand, will look for a breakout to pile in for a rally into a new record high.
USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a strong resistance around the 94.00 handle. Again, we can expect the sellers to step in here to target the lower bound of the channel, while the buyers will look for a break to increase the bullish bets into new highs.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have an upward trendline defining the bullish momentum. The buyers will likely continue to lean on the trendline to keep pushing into new highs, while the sellers will look for a break to increase the bearish bets into new lows.
UPCOMING CATALYSTS
Tomorrow we get the latest US Jobless Claims figures and the US PMIs. The focus remains on US-Iran headlines.
