The Indian Rupee contiues to bleed as it falls to record lows against the US Dollar

FUNDAMENTAL
OVERVIEW

USD:

The US Dollar recovered a
little yesterday as Trump announced that he reached a “framework” of a
deal for Greenland and that he won’t go ahead with tariffs. Moreover, we got
Fed’s Cook hearing yesterday and the Supreme Court appeared likely to deny
Trump’s request to immediately fire her.

Barring another
geopolitical escalation somewhere, the focus will switch to the US data and the
Fed’s interest rate path for 2026. The data has been improving recently,
especially on the labour market side. If we more of such or even better, that
will likely keep supporting the US Dollar as rate cuts get slowly priced out. Right now, traders expect a total of 47 bps of easing by year-end.

INR:

The Indian Rupee remains
on a bearish structural trend against the US Dollar, and the recent technical
breakouts increased the momentum into new record lows as RBI’s interventions
continue to fail.

The Rupee bounced yesterday
as global risk sentiment improved after Trump scrapped his tariffs threats over
Greenland. The relief didn’t last long though as the INR started to weaken
again. In terms of fundamentals, nothing has changed.

The latest India’s
annual inflation rate increased to 1.33% in December compared to 0.71% in
November. This is still way below the RBI’s 4% target but closer to the bottom
of their tolerance band at 2%. Traders don’t expect the RBI to deliver another
rate cut at the upcoming meeting in February.

On the trade
front, traders are watching for potential tariff hikes on India after Trump
threatened to impose 25% tariffs on any country doing business with Iran as the
US President continues to put pressure on the regime. India has been among the
largest Iran’s trade partners in recent years, so traders are watching for the
risk of another escalation.

USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily
chart, we can see that USDINR rallied into a new all-time high yesterday and it’s
now approaching the upper bound of the channel near the 92.00 handle. If we get
there, we can expect the sellers to step in with a defined risk above the
channel to position for a drop back into the bottom trendline. The buyers, on
the other hand, will want to see the price breaking higher to increase the
bullish bets into new highs.

USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour
chart, we can see that we have an upward minor trendline defining the bullish
momentum on this timeframe. The buyers will likely continue 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 pile in for a drop
into the lower bound of the channel, with a break of the 91.00 handle giving
the sellers more conviction.

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 trendline, while the sellers will continue
to wait for a break lower or for the price to come into the upper bound of the
channel.

UPCOMING CATALYSTS

Today we get the latest US Jobless Claims figures, while tomorrow we
conclude the week with the US Flash PMIs.