FUNDAMENTAL
OVERVIEW
USD:
The US dollar has
been under some pressure at the start of the week as the sharp decline in oil prices on expectations of a de-escalation and an earlier
end to the conflict increased going into the UN General Assembly.
However, those expectations faded after the UN
General Assembly, where Trump reiterated that the US would make a deal with
Iran after the November elections. His remarks reduced optimism over a
near-term resolution and contributed to a renewed rise in oil prices.
Risk sentiment subsequently deteriorated, with the
greenback strengthening across the board and then extending the gains on Wednesday
after the US Flash PMIscame out much stronger than expected. The data triggered
another hawkish repricing, sending Treasury yields to new highs.
The markets are currently focused on renewed
hopes for quick de-escalation and the reopening of the Strait of Hormuz
following yesterday’s news that Iran has put a fast-track offer on the table,
promising to reopen the Strait of Hormuz within seven days if the US meets its
terms. Iran’s Foreign Minister Araghchi is staying in New York over the weekend
to await a US response.
A breakthrough would be negative for the US
dollar in the short-term as the aggressive rate hike bets will likely get pared
back. A prolonged stalemate or even a re-escalation, on the other hand, will
likely continue to support the greenback into new highs.
INR:
On the INR side, the
rupee has followed crude oil in lockstep this week, strengthening into the UN
General Assembly on positive expectations about a quick resolution and weakening
after oil prices rebounded on fading hopes.
Higher oil prices
are negative for the rupee because India imports most of its crude, so a larger
oil bill increases demand for dollars, widens the trade deficit and puts
downward pressure on INR.
In the short-term,
the INR will continue to be driven mainly by oil prices, so the US-Iran
negotiations will be key. A breakthrough should give the Indian rupee a boost
and we might see the USD/INR pair dropping back to the 95.10 support pretty
quickly. Conversely, an extended stalemate or even a re-escalation will likely continue
to support the pair into new highs.
In the big
picture, the Indian Rupee remains on a bearish structural trend against the US dollar,
so dip-buyers will continue to look for opportunities around strong major technical
levels to keep pushing the USD/INR pair into new highs.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily
chart, we can see that USDINRis trading at the major resistance zone around the 96.10 level. The
sellers will likely continue to step in around the resistance, with a defined
risk above it, to position for a drop back into the 95.10 support. The buyers,
on the other hand, will want to see the price breaking higher to increase the
bullish bets into the record highs next.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we have an upward trendline defining the bullish momentum. If we get another
pullback into the trendline, we can expect the buyers to lean on it, 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 95.10
support.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here as the buyers will have a better risk
to reward setup around the trendline, while the sellers will want to see a
break to target new lows. Nevertheless, a break above the recent high around
the 96.40 level could increase the bullish momentum, especially if it’s coupled
with a surge in oil prices due to negative US-Iran developments.
UPCOMING CATALYSTS
Today we don’t have anything
on the agenda but traders will keep a close eye on US-Iran developments after yesterday’s
proposal of reopening the Strait of Hormuz under certain conditions.
This article was written by Giuseppe Dellamotta at investinglive.com.