USD:
The Federal Reserve is widely expected to keep
interest rates unchanged. With no new projections or dot plot expected at this
meeting, changes in Fed Chair Warsh’s or statement’s language will be the main
focus.
Despite higher September inflation data strengthening
the case for further tightening, key Fed members have signalled little urgency
to deliver a back-to-back rate hike in October. A hawkish hold remains the base
case as the debate centres around the timing and extent of further tightening
rather than direction.
Warsh is expected to reiterate that monetary policy is
not sufficiently restrictive and that additional tightening is warranted. He’s
also seen reaffirming the commitment to price stability but cautioning against
overreacting to individual data points.
Markets are already pricing an 80% chance of a rate
hike in December, so the focus will be more on the 2027 outlook. Traders see
roughly two more rate hikes next year, with the first fully priced in move in
April.
A surprise rate hike would trigger strong risk-off
flows. The US dollar and Treasury yields might initially react positively to
the decision, but I think the reaction will be quickly faded as growth concerns
should intensify amid falling stock markets.
A largely neutral outcome that avoids signalling an
imminent rate hike could be taken as dovish and trigger a correction in the US
dollar. I would also expect the same reaction but with less magnitude in case
the Fed just delivers on the hawkish hold expectations, avoiding major
surprises.
INR:
On the INR side, the
rupee started to erase the intervention-driven gains recently as oil prices
extended the gains into new highs. Despite repeated RBI interventions, oil
prices continue to be the main driver.
India is heavily
dependent on imported crude, meaning higher oil prices require Indian importers
to buy more dollars to pay for energy, increasing demand for USD and worsening
the country’s trade and current-account position.
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 USDINRrebounded from the major support zone around the 95.10 level as the
buyers stepped in to target a rally to the 96.10 resistance. If we get another
pullback to the support, we can expect the buyers to step in again, with a defined
risk below the support, to keep targeting the resistance. The sellers, on the
other hand, will look for a break lower to extend the drop into the 94.00 handle
next.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, the recent price action might have created an inverse head and shoulders
near the support zone. The sellers will likely continue to lean on the
neckline, with a defined risk above it, to keep pushing into new lows. The
buyers, on the other hand, will look for a break higher to pile in for a rally
into the 96.10 resistance next.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here as consolidation near the support could
lead to many fakeouts and a generally choppy price action. The key levels to
watch should be the neckline and the 95.10 support.
UPCOMING CATALYSTS
Todaywe
have the FOMC rate decision. Tomorrow, we get the US GDP report, the US PCE and
the latest US Jobless Claims figures. On Friday, we conclude the week with the
US Employment Cost Index.
This article was written by Giuseppe Dellamotta at investinglive.com.