FUNDAMENTAL
OVERVIEW
USD:
The US dollar strengthened across the board yesterday after the US PCE
data. The reaction was honestly odd because literally nothing has changed. The
Core figures were in line with forecasts and the market pricing held steady,
with 35% chance of a rate hike in September. Therefore, I would dismiss it as
just noise.
Looking ahead, the key events will be Fed Chair Warsh’s speech at the
Jackson Hole Symposium tomorrow, a potential US-Iran deal in the coming days
and the US CPI report on September 11.
After the Treasury buyback announcement and Bessent’s “verbal” intervention
to suppress long-term yields, traders will be eager to see whether Fed Chair Warsh
leans against the easing in financial conditions.
If he doesn’t, the US dollar will likely come under renewed pressure from
further easing in financial conditions and the dovish repricing in near-term
interest rate expectations. On the other hand, if he pushes back saying things
like “recent easing in financial conditions, if sustained, could
complicate the process of returning inflation to our target” or “if
recent easing threatens progress toward price stability, we will not hesitate
to respond appropriately” and so on, the market may interpret it as a
signal for a potentially hawkish September FOMC and give the greenback a boost.
INR:
On the INR side, the
currency rallied strongly on Tuesday as oil prices sold off following positive
developments on the US-Iran side which raised market hopes for a potential
peace deal, or at least a return to MoU conditions.
Yesterday, the INR
hasn’t traded due to a bank holiday and today it opened much higher because oil
prices erased most of the Tuesday’s losses yesterday.
Higher oil prices
tend to weaken the Indian rupee because India imports most of its oil,
increasing demand for US dollars, widening the trade deficit, and putting
pressure on the country’s external balances.
In the short-term,
the INR will continue to be driven by oil prices, so it might continue to range
until the US and Iran find an agreement and the Strait of Hormuz is reopened.
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 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 between the key 95.10 support and the 96.10 resistance. Market
participants will continue to play the range by buying at support and selling
at resistance until we get a breakout on either side.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we can see that after the Wednesday’s bank holiday, the pair opened
higher as oil prices erased most of the Tuesday’s losses. If we get a pullback
into the minor support zone around the 95.60 level, we can expect the buyers to
step in with a defined risk below the support to keep pushing into the
resistance. The sellers, on the other hand, will look for a break lower to pile
in for a drop back 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 95.60 support to keep pushing into the key
resistance, while the sellers will wait for a break below the 95.60 support or
a rally into the 96.10 resistance to position for new lows.
UPCOMING CATALYSTS
Today we get the
US Jobless Claims figures. Tomorrow, we conclude the week with Fed Chair
Warsh’s speech at the Jackson Hole Symposium.
This article was written by Giuseppe Dellamotta at investinglive.com.