FUNDAMENTAL OVERVIEW
USD:
The US dollar has been trading mostly sideways after the hot US NFP report and the slightly soft US CPI data of last week. The market firmed up rate cut bets with 60 bps of easing seen by year-end but overall, the data didn’t really change anything in the bigger picture.
The bearish positioning in the US dollar remains crowded, so it’s hard to see much more weakness unless the data deteriorates significantly or we get some kind of negative shock in the economy. This week, all the important stuff will be released on Friday as we get the US Flash PMIs and the US Q4 GDP. We might also get the US Supreme Court decision on Trump's tariffs.
INR:
The Indian Rupee remains on a bearish structural trend against the US Dollar, but the recent positive developments on the tariffs and inflation front gave the INR a boost. In fact, the US and India finally reached a trade deal and President Trump announced that he will lower the tariffs from 25% to 18%.
The RBI held interest rates steady at the last meeting and last week we saw inflation rising to 2.75% in January from 1.33% in December. This should push rate cuts aside for the time being as inflation is now inside the 2-6% tolerance band of the 4% target.
If the US Supreme Court rules against Trump’s tariffs we could see another strong rally in the Indian Rupee. On the other hand, if the Court were to keep the tariffs in place, nothing should change as the market has already adjusted to the tariffs.
USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDINR is consolidating at the lower bound of the channel as the dip-buyers continue to step in to position for a rally into the upper bound of the channel around the 93.00 handle. The sellers will want to see the price breaking lower to open the door for new lows with the 89.50 level as the first target.
USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price broke above the downward trendline recently but couldn’t extend above the strong resistance zone around the 91.00. The buyers will want to see the price breaking higher to increase the bullish bets into the upper bound of the channel. The sellers, on the other hand, will continue to step in around the resistance with a defined risk above it to target a break below the lower bound of the channel.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the sellers will likely continue to step in around the resistance, while the buyers will look for a break higher to increase the bullish bets into new highs.
UPCOMING CATALYSTS
Today we have the FOMC Meeting Minutes. Tomorrow, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US Q4 GDP, the US PCE price index for December, the US Flash PMIs and the potential US Supreme Court decision on Trump’s tariffs.
