The RBI intervenes to stop the bleeding in the Indian Rupee after it tumbled to record low

FUNDAMENTAL
OVERVIEW

USD:

The US
dollar strengthened across the board on safe haven demand this week after the
US-Iran conflict erupted over the weekend. The main driver though was the
market’s realisation that rate cuts might not come as soon as expected.

In fact,
higher oil prices will eventually put upward pressure on inflation and the US
data this week clearly showed that the economy has been re-accelerating since
the start of the year and not slowing down further.

Traders
pared back their rate cut bets this week with the total easing by year-end now
seen around 41 bps vs 58 bps on Friday. Tomorrow, we have the US NFP report and
all the jobs data we got up until now suggests that we will likely get good
data.

INR:

In the big
picture, the Indian Rupee remains on a bearish structural trend against the US dollar.
This week, the bearish momentum increased substantially due to strong risk
aversion in the markets. The RBI had to intervene again today after the Rupee
tumbled to new record lows.

Supply disruptions
through the Strait of Hormuz and a renewed surge in global oil prices led
traders to expect a negative impact to the Indian economy. In fact, almost 90%
of India’s crude oil requirement is imported and 55% comes from the Middle
East.

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 tumbled today following the RBI intervention. Dip-buyers will be
looking for opportunities on the lower timeframes to keep targeting the upper
bound of the channel. That’s where 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.

USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour
chart, we have an upward trendline defining the bullish momentum. If the price
gets there, we can expect the buyers to lean on the trendline with a defined
risk below it to keep pushing into new highs. The sellers, on the other hand,
will look for a break lower to extend the pullback into the 91.00 support 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 be looking for
a bounce around the trendline, while the sellers will look for a breakout.

UPCOMING CATALYSTS

Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the
week with the US NFP report. Continue to keep an eye on the US-Iran war
headlines as that’s what the market is focused on right now.