Renewed uncertainty around tariffs weighs on the Indian Rupee amid Trump threats

FUNDAMENTAL
OVERVIEW

USD:

The US
dollar weakened across the board on Friday after the US Supreme Court struck
down Trump’s reciprocal tariffs. The resulting policy uncertainty is what is
likely to have weighed on the greenback, even though nothing has really
changed.

Trump has
already imposed new tariffs under a different law and USTR Greer has stated
that the tariff deals remain in place and they will be honoured. Moreover, the
new levies actually reduce the effective average tariff rate.

The dollar
recouped most of the losses, but it might remain rangebound for now as traders
await new catalysts and further developments.

The real
risks remain a potential US-Iran military escalation which could boost the
greenback on severe risk-off mood or a hawkish repricing on stronger US data
which would have a positive effect on the USD. Fed’s Waller placed a great deal
on next week’s NFP report.

INR:

The Indian Rupee remains
on a bearish structural trend against the US dollar. After a short-term boost
from the US-India trade deal that reduced tariffs to 18%, the INR restarted its
downward trend.

The US Supreme
Court ruling on Trump’s tariffs on Friday triggered a positive spike in the
Rupee on expectations of lower tariffs, but after Trump quickly reimposed them
using different laws, the gains were pared back.

This created some
uncertainty in the short-term and both countries have decided to defer trade
talks that were due this week “until both sides are able to study the
implications of recent developments”.

Trump has threatened to impose higher tariffs on countries that “play games” with recent trade deals, so it wouldn’t be surprising to see him doing something crazy out of the blue. This is a risk that could keep weighing on the Rupee.

USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily
chart, we can see that USDINR has been creeping up slowly as dip-buyers started to pile in near
the lower bound of the channel. The target remains the top trendline around the
93.00 handle. The sellers will want to see the price breaking below the lower
bound of the channel to open the door for new lows with the 89.50 level as the
first target.

USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour
chart, we can see that the price broke above the key resistance zone around the
91.00 handle and got stuck in a consolidation. The spike lower was caused by
the US Supreme Court ruling, which was quickly faded. The buyers will likely
continue to step in around the 91.00 support to keep pushing into new highs,
while the buyers will look for a break lower to target a pullback into the
lower bound of the channel.

USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour
chart, there’s not much we can add here as traders will likely continue to play
the range until we get a breakout on either side.

UPCOMING CATALYSTS

Tomorrow we get the latest US Jobless Claims figures and the third round of
US-Iran talks. On Friday, we conclude the week with the US PPI report.