Indian Rupee rebounds on suspected RBI intervention; strong dollar and higher oil prices remain a headwind
FUNDAMENTAL OVERVIEW
USD:
The US dollar strengthened across the board on Friday after Fed Chair Warsh delivered a hawkish speech at the Jackson Hole Symposium.
The key passage was him saying "I would be hard pressed to describe broad financial conditions as restrictive". The market interpreted that as him leaning against the recent easing in financial conditions and, therefore, retightened them.
This process has, of course, extended the corrections in the "debasement" trades, with the US dollar returning to pre-US Treasury announcement levels. The rate hike probabilities for the September meeting have also increased, with the market now seeing a 60% chance of a hike.
Warsh has also reiterated that the Fed is focused solely on inflation now and mentioned that the progress has been slow. For this reason, I think only a soft US CPI report could bring the probabilities below 50% and deter the Fed from hiking at the upcoming meeting.
If the probabilities stay at or above 50%, the Fed might be forced to hike regardless because failure to do so would send a dovish message.
INR:
On the INR side, the currency sold off on Friday following the hawkish Fed Chair Warsh speech at Jackson Hole. Nevertheless, we saw a quick rebound today despite a jump in oil prices. This might have been the result of RBI’s intervention since we haven’t got any positive catalyst for the rupee.
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.
In the short-term, the INR will continue to be driven by oil prices, so the rangebound price action could persist 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 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 got the pullback into the minor support zone around the 95.60 level. This is where 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 next.
USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here, but there’s a minor upward trendline adding confluence to the minor support around the 95.60 level. Again, the buyers will likely step in here to target a rally into the 96.10 resistance, while the sellers will look for a break lower to extend the drop into the 95.10 support.
UPCOMING CATALYSTS
Tomorrow, we have the US ISM Manufacturing PMI and the US Job Openings data. On Wednesday, we get the US ADP report. On Thursday, we have Fed’s Waller, the US Jobless Claims and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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