USD/INR consolidates at the bottom of the channel: do we get another rally or breakout?

FUNDAMENTAL
OVERVIEW

USD:

The US
Dollar continues to rebound against the major currencies after the strong
selloff experienced in the last couple of weeks of January. The greenback
remains supported by improving US data and strong PMIs potentially hinting to
stronger economic activity going forward.

If the
data continues to come out strong, traders will have to pare back their dovish
Fed bets, and that’s going to boost the US Dollar further. The US NFP and CPI
reports next week will be critical.

The trend
for the dollar is looking increasingly bullish, but traders will still look for
confirmation from the data to gain more conviction. We can expect a rally in
the greenback across the board on a strong NFP report ands more so if the CPI
data surprises to the upside. Soft data, on the other hand, will likely put
some pressure on the dollar, although we shouldn’t see the same momentum
experienced in January.

INR:

The Indian Rupee remains
on a bearish structural trend against the US Dollar, but the latest positive
development on the tariffs front gave the INR a strong boost. In fact, US President Trump announced on Truth Social that they reached a deal with India and the US will
lower the tariffs from 25% to 18%.

Tomorrow, we have
the RBI rate decision where the central bank is expected to hold interest rates
steady after inflation increased to 1.33% in December vs 0.71% in November. Analysts
expect further improvement towards the RBI’s target in the next months.

USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily
chart, we can see that USDINR is rejecting the lower bound of the channel. This is where the
buyers are stepping in with a defined risk below the bottom trendline to
position for a rally back into the upper bound of the channel. The sellers will
want to see the price breaking lower to pile in for a drop into new lows.

USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour
chart, we can see more clearly the consolidation at the lower bound of the
channel. There’s not much we can add here as the buyers will continue to step
in to keep targeting the top trendline, while the sellers will look for a break
lower to increase the bearish bets into the 89.50 level next.

USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour
chart, we can see that we have a minor resistance zone around the 90.60 level.
If the price gets there, we can expect the sellers to step in at the resistance
with a defined risk above it to keep pushing into new lows. The buyers, on the
other hand, will look for a break higher to increase the bullish bets into new
highs.

UPCOMING CATALYSTS

Today we have the US Jobless Claims and Job Openings data. Tomorrow, we
conclude the week with the RBI rate decision and the University of Michigan
Consumer Sentiment report.