The Indian Rupee is set to fall into new record lows if the US-Iran crisis drags on for longer
FUNDAMENTAL
OVERVIEW
USD:
The US dollar has been under pressure since last week as the soft US
inflation data led to a repricing of Fed rate hike bets. There’s now just a 14%
chance of a rate hike in July, but the probabilities for a September move remain
above 50% (currently 62%).
The US-Iran crisis in the background is keeping inflation risks skewed to
the upside, so the downside in the greenback should remain limited without a
clear de-escalation. We can expect the rangebound price action to persist, with
de-escalatory news triggering short-term weakness and escalatory headlines
giving the greenback a boost.
INR:
On the INR side, the
Rupee continues to extend the losses as the tight inverse correlation with oil
prices returned after the renewed US-Iran crisis.
This pressure will
likely persist as long as the conflict drags on. The Rupee will need a clear
de-escalation to trigger a relief rally and erase the monthly losses.
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 USDINRbroke above the key resistance zone around the 96.10 level and
extended the gains as the buyers increased the bullish bets into new record
highs. If we get a pullback, we can expect the buyers to lean on the trendline
and the old resistance-turned-support to keep pushing into new highs. The
sellers, on the other hand, will want to see the price breaking below the
trendline to open the door for a drop into the 94.00 handle next.
USDINR
TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour
chart, we have a minor trendline defining the bullish momentum on this
timeframe. The buyers will likely continue to lean on the trendline with a
defined risk below it to keep pushing into new highs. The sellers, on the other
hand, will want to see the price breaking lower to extend the pullback into the
96.10 support next.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour
chart, there’s not much we can add here as the buyers will continue to step in
around the trendlines, while the sellers will look for downside breaks to
target new lows.
UPCOMING CATALYSTS
On Thursday,
we get the latest US Jobless Claims figures, while on Friday we conclude the
week with the Flash US PMIs. The focus remains on US-Iran headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.