FUNDAMENTAL
OVERVIEW
USD:
The US dollar spiked
to the upside on Friday after the US
NFP report showed job growth in August almost tripling the consensus
estimate of 56K. The dollar gains didn’t last long, though, as most of the
NFP-driven moves got faded thereafter.
This happened
because the market focus was not on the NFP report, but on the CPI. The market pays
attention to the data that the central bank is focused on, and the Federal
Reserve is currently focused on inflation.
In fact, just a
day before the NFP report, Fed’s Waller mentioned that he would support keeping
interest rates unchanged at the upcoming FOMC meeting, but a hot CPI would make
him consider a rate hike.
This week is all about the US CPI data. Unless,
we get some surprising breakthrough in US-Iran relations, the price action will
likely remain mostly rangebound or a bit positive for the greenback as traders
hedge into the main event.
INR:
On the INR side, the
currency has been completely detached from reality in the past week, as it
rallied despite another increase in oil prices and a relatively stable US
dollar. This might have been the result of a series of RBI’s interventions, as
we saw three strong spikes without any positive catalyst for the rupee.
According
to Reuters, bankers said the central bank had been increasingly active
before the formal market opening, followed by interventions throughout the
trading days.Previously, the RBI largely stepped in to curb
weakness in the rupee, and more recently it appears to be using its
intervention to push the currency higher.
Therefore, we will
likely see dip-buyers in the USD/INR pair stepping in soon, as intervention
gains get usually faded without a change in fundamentals, although a negative
US CPI on Friday could weaken the US dollar across the board.
In the short-term,
the INR will continue to be driven by oil prices and the hawkish/dovish
repricing in Fed interest rate expectations. Therefore, the pair might keep
trading in the wide range for longer 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 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 USDINRdropped all the way back to June lows on a series of RBI
interventions. If we get another push lower, the buyers will likely step in
around the key 94.00 handle with a defined risk below it to position for a
rally into new record highs. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 92.65 level
next.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we can see the price is breaking above the downward trendline that was
defining the bearish momentum. We can expect the buyers to pile in around these
levels with a defined risk below the recent low to target a pullback into the
major downward trendline. The sellers, on the other hand, will want to see the
price falling back below the trendline to extend the drop into the 94.00
handle.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here, but there’s a minor resistance around
the 94.80 level. That’s where we can expect the sellers to step in with a defined
risk above the resistance to keep pushing into new lows, while the buyers will
look for a break to increase the bullish bets into the major downward trendline
around the 95.40 level.
UPCOMING CATALYSTS
On Thursday, we get the
US PPI report and the US Jobless Claims figures. On Friday, we conclude the
week with the US CPI report.
This article was written by Giuseppe Dellamotta at investinglive.com.