FUNDAMENTAL
OVERVIEW
USD:
The US dollar has been broadly stronger since last week following renewed
US-Iran escalations. The traffic in the Strait of Hormuz has once again come to
a halt and oil prices started to rise considerably.
This situation triggered a hawkish repricing in interest rate expectations
with chances for a rate hike in July rising back to 33% and the total
tightening in 2026 to 39 bps. This week, traders will focus on US-Iran
headlines, the US CPI report tomorrow and Fed Chair Warsh testimony.
Given the escalation in the Middle East, an in line or soft CPI tomorrow
might not have the same effect it could have had without the renewed
geopolitical risk. Nonetheless, we could see the risk sentiment improving with
some minor dovish repricing.
A hotter than expected CPI, on the other hand, will likely trigger strong
risk off across the board on higher chances of a rate hike already in July and
the negative growth outlook stemming from the Middle East situation.
Given these risks, we can expect the market to be either rangebound or
leaning on the defensive side heading into tomorrow’s CPI release.
INR:
On the INR side, the
Rupee’s slide accelerated recently following renewed US-Iran escalation. The
tight correlation with oil prices returned and as crude oil surged, the Rupee
extended the losses.
Both sides will
likely want to de-escalate things which could offer some support to the Rupee,
but tomorrow we have also the US CPI report and that could take the USD/INR
pair higher in case the data surprises to the upside.
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. In the short-term, a
de-escalation and soft US CPI figures should give the Indian Rupee some relief.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily
chart, we can see that USDINRreached the key resistance zone around the 96.10 level where we got
a rejection as the sellers stepped in with a defined risk above the resistance
to position for a drop into the 94.00 handle. The buyers will need the price to
break above the resistance to open the door for a rally into the record highs.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we have a trendline defining the bullish structure. If we get a 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 to pile in for a drop into new lows.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here as the buyers will likely wait for a
pullback into the trendline or a break above the resistance. The sellers, on
the other hand, will need a break below the trendline to open the door for new lows.
UPCOMING CATALYSTS
Today, we have Fed’s
Waller speaking on the Economic Outlook which could offer some further information
on their reaction function. Tomorrow, we get the US CPI report and Fed Chair
Warsh testimony. On Wednesday, we have the US PPI report and the BoC rate
decision. On Thursday, we get the US Retail Sales and Jobless Claims data. On
Friday, we conclude the week with the University of Michigan Consumer Sentiment
survey.
This article was written by flfeaa2662d774455a8d50fa77b791ed5f at investinglive.com.