FUNDAMENTAL OVERVIEW
USD:
The US dollar skyrocketed in the final part of last week as prospects of a quick end to the war faded and oil resumed the rally towards triple digit levels. Traders continue to price out the rate cut bets amid surging energy prices.
On Wednesday, we have the FOMC policy decision where the central bank is expected to keep interest rates unchanged with Miran, Waller and Bowman likely dissenting in favour of a rate cut. At this meeting, we will also get the Summary of Economic Projections and the Dot Plot.
The Fed is likely to revise growth forecasts lower, while upgrading inflation estimates. The median Dot Plot should remain unchanged with one rate cut expected by year-end. Overall, the central bank is likely to stress patience amid the US-Iran war but maintain an easing bias.
INR:
In the big picture, the Indian Rupee remains on a bearish structural trend against the US dollar. More recently, the bearish momentum increased due to risk aversion in the markets amid the US-Iran war.
The longer this war drags on, the greater the negative impact will be on the global economy. This would keep the USDINR underpinned into new record highs.
A de-escalation could give the INR a boost in the short-term which will likely be a good opportunity for traders to buy the dip in the USDINR pair as the main uptrend will likely remain intact.
USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDINR is approaching the upper bound of the rising channel. If the price gets there, we can expect the sellers to step in with a defined risk above the top trendline to position for a drop back into the lower bound of the channel. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, the recent price action formed a rising wedge pattern. This is generally a signal of weakening momentum. The buyers will likely lean on the bottom trendline with a defined risk below it to keep pushing into the upper bound of the channel. The sellers, on the other hand, will look for a break lower to pile in for a drop into the 91.63 level next.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the buyers will have a better risk to reward setup around the bottom trendline, while the sellers will look for a breakout to open the door for new lows. A break above the top trendline though, could increase the bullish momentum following the recent wedge-type consolidation. In that case, we can expect the buyers to pile in to ride the rally into the upper bound of the channel.
UPCOMING CATALYSTS
On Wednesday we have the US PPI report and the FOMC policy decision. On Thursday, we get the latest US Jobless Claims figures. The focus remains on the US-Iran war, so keep an eye on the headlines, especially those regarding the Strait of Hormuz.
