KEY POINTS:
- Suspected RBI intervention boosted the Indian Rupee
- India's central bank actions not enough to stop the INR depreciation
- Renewed tensions on the tariffs front remain a negative for the Rupee
- US dollar bounces around as traders await the US NFP report on Friday
FUNDAMENTAL OVERVIEW
USD:
The US dollar has been bouncing around in the past couple of days as traders continue to wait for the US NFP report on Friday. We got a soft US ISM Manufacturing PMI recently that weighed on the greenback but the losses were erased in the following days.
In terms of macro, nothing has changed in these two weeks. The latest NFP and CPI reports came both on the softer side and the market is still pricing 62 bps of easing by year-end. The data in December was taken with a pinch of salt given the shutdown related issues, but the next releases will give us a clearer picture.
The market expects the Fed to cut in March at the earliest, so we will need very soft data this month to force them to act sooner. Nonetheless, if the data continues to come in on the softer side, the market will likely increase the total easing for 2026 and that should continue to weigh on the US dollar.
On the other hand, if the data strengthens, traders will likely pare back their rate cut bets and that will likely offer the greenback some support.
INR:
The Indian Rupee jumped today following a suspected RBI intervention. The Indian central bank has been intervening more frequently recently but the bearish pressure on the Rupee is expected to remain due to structural headwinds.
On Monday, Trump threatened more tariffs on India “if they don’t help on Russian oil issue”, so the tensions on the trade front continue to be a negative for the currency.
USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that the price couldn’t extend the rally into the key 90.40 level as RBI’s intervention pushed the pair lower. Nevertheless, the upside should remain intact, and the buyers will likely step back in around the 89.70 area where we can find a strong support and the lower bound of the rising channel. The sellers, on the other hand, will need the price to break out of the channel to extend the drop into the 88.90 level next.
USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the strong push lower today following the suspected RBI intervention. Again, the buyers will likely step in around the 89.70 support zone with a defined risk below the lower bound of the channel to position for a rally into the 92.00 handle. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the 88.90 level next.
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 89.70 level and the bottom of the channel, while the sellers will wait for a breakout to pile in for new lows.
UPCOMING CATALYSTS
Today we have the US ADP, the US ISM Services PMI and the US Job Openings data. Tomorrow, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report.
