FUNDAMENTAL OVERVIEW
USD:
The US Dollar strengthened yesterday following strong US Jobless Claims data. Traders responded by erasing the dovish bets seen after the softer than expected US core inflation data. The total easing by year-end fell to 48 bps compared to 54 bps before the release.
Fed members continue to support the current patient and data-dependent stance, and the improvement in jobs data is underpinning the greenback. This bullish dollar momentum will likely persist or even accelerate if the data keeps on strengthening.
INR:
The Indian Rupee remains on a bearish structural trend against the US Dollar, and the latest technical breakout increased the momentum as RBI’s interventions continue to fail.
The latest India’s annual inflation rate increased to 1.33% in December compared to 0.71% in November. This is still way below the RBI’s 4% target but closer to the bottom of their tolerance band at 2%. Traders don’t expect the RBI to deliver another rate cut at the upcoming meeting in February.
On the trade front, traders are watching for potential tariff hikes on India after Trump threatened to impose 25% tariffs on any country doing business with Iran as the US President continues to put pressure on the regime. India has been among the largest Iran’s trade partners in recent years, so traders are watching for the risk of another escalation.
USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDINR finally broke above the key resistance zone around the 90.40 level. The buyers piled in more aggressively on the breakout targeting a rally into the upper bound of the channel around the 92.00 handle. This remains a buy-on-dips market, so the sellers will likely need to wait for the price to come into the upper bound of the channel or break below the bottom trendline.
USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly how the breakout led to a quick surge as buyers piled in with more conviction. If we get a pullback into the resistance now turned support, we can expect the buyers to step back in with a defined risk below the support to keep pushing into the upper bound of the channel. The sellers, on the other hand, will need the price to fall back below the support to pile in for a deeper pullback into the lower bound of the channel.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much else we can add here as the buyers will look for dip-buying opportunities around the 90.40 support, while the sellers will continue to wait for a break lower.
