FUNDAMENTAL OVERVIEW
USD:
The US dollar has been on the backfoot since Monday as the positive US-Iran deal expectations kept weighing on the greenback. The second round of negotiations were expected to begin today but we never had an official date. They are expected to happen before the April 22 ceasefire deadline though.
In the meantime, we got reports that US and Iranian negotiators made progress in talks on Tuesday and they were moving closer to a framework agreement to end the war. A US official has also mentioned that if a framework agreement is reached, the ceasefire would need to be extended to negotiate the details of a comprehensive deal.
Everything now hinges on US-Iran talks. If negotiations were to break down again, we might see a short-term rally in the greenback, but as long as the ceasefire holds, the upside could remain limited. On the other hand, a peace deal might see the dollar extending the losses although a “sell the fact” type of reaction remains a risk.
The market is now pricing in 10 bps of easing by year-end and that might increase on a peace deal. I think the market might get disappointed further down the road as the boost to economic activity amid a resilient labour market and rate cut expectations will likely keep inflation above the 2% target and the Fed on the sidelines.
INR:
The Indian rupee stabilised recently 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.
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 fell below the upper bound of the channel and started to consolidate. 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 have a minor upward trendline acting as support. The buyers continue to step in around the trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to increase the bearish bets into new lows.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see more clearly the consolidation between the minor upward trendline and the resistance zone around the 94.00 handle. There’s not much we can add here as the buyers will look for bounces around the trendline and wait for a break above the resistance, while the sellers will continue to step in around the resistance and wait for a break below the trendline.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures, but the focus remains on US-Iran headlines.
