KEY POINTS:
- The RBI decided to intervene after the recent selloff in the Indian Rupee
- The US unemployment rate surprised to the upside
- USDINR remains skewed to the upside, buyers will look for key technical breaks
- US CPI coming up tomorrow
FUNDAMENTAL OVERVIEW
USD:
We finally got the most recent US jobs report yesterday, and the data surprised to the downside. In fact, despite the headline number slightly beating expectations, the more important unemployment rate jumped to 4.6% vs 4.4% prior.
There were some positives as the permanent job losers rate was a bit lower, but the main takeaway is that the trend remains to the upside and that the unemployment rate was higher than the Fed’s year-end forecast.
Fed Chair Powell made it pretty clear in his last press conference that they are more focused on the labour market weakness, and they can tolerate some higher inflation given the transitory expectations.
This suggests that we could see another rate cut sooner than expected. The market might start to price that in with more conviction if tomorrow’s US CPI data doesn’t overshoot.
INR:
The RBI decided to finally intervene again to stop the recent selloff in the Indian Rupee. The last intervention was in October, but as it usually happens when the fundamentals remain against a currency, the INR eventually fell to new lows.
We can expect the Rupee to weaken again in the next months, but in the short-term, traders will look for key technical breaks before piling into USDINR longs again.
USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDINR sold off right from the upper bound of the rising channel around the 91.00 handle following the RBI’s intervention.
The natural target for the sellers should be the lower bound of the channel around the 89.00 level, but they will need to keep the price below the key zones.
The buyers, on the other hand, will continue to step in around the key levels to keep targeting new record highs.
USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see that the price bounced around the upward trendline as dip-buyers immediately stepped in. The price is now trading right around the key 90.40 level.
The sellers will likely step in here with a defined risk above the level to position for a drop into the 89.70 level next.
The buyers, on the other hand, will want to see the price rising above the 90.40 level to increase the bullish bets into new all-time highs.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much else we can add here as the sellers will likely continue to step in around these levels to target new lows, while the buyers will look for a break higher to position for a rally into a new record high.
UPCOMING CATALYSTS
Tomorrow we have the US CPI report.
