FUNDAMENTAL OVERVIEW
USD:
The US dollar sold off across the board today after Trump announced on Truth Social a two-sided ceasefire agreement for two weeks while the US and Iran negotiate a lasting peace deal. The discussions will begin on Friday in Islamabad and may be extended if both parties agree.
Given the de-escalation, the risk sentiment in the markets turned around quickly and risk assets got heavily bid. As you would expect, traders went back to price in rate cuts for the Fed with now 14 bps of easing expected by year-end compared to basically zero before the ceasefire announcement.
There’s still a risk that the war could restart any time as the US and Iran haven’t officially ended the hostilities. Nonetheless, the bias has now turned bearish for the dollar as traders look forward to a lasting peace deal.
INR:
The Indian rupee opened higher today mainly because of the US Dollar weakness and the better risk sentiment.
The RBI held interest rates steady today at 5.25% and downgraded growth forecasts due to the US-Iran war. In fact, 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.
USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDINR fell below the upper bound of the channel opening the door for a bigger correction. The sellers will likely pile 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 resistance zone around the 93.50 level and the upper bound of the channel. We can expect the sellers to step in around the resistance with a defined risk above the top trendline to keep pushing into new lows. The buyers, on the other hand, will look for a break above the top trendline to pile in for a rally into new highs.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here but we have a downward trendline adding confluence to the resistance which could give the sellers more conviction to target new lows.
UPCOMING CATALYSTS
Today we have the FOMC meeting minutes. Tomorrow, we get the US PCE price index and the latest US Jobless Claims figures. On Friday, we conclude the week with the US CPI report and the University of Michigan Consumer Sentiment survey. As a reminder, we have also the US-Iran negotiations in Islamabad on Friday.
