FUNDAMENTAL
OVERVIEW
USD:
The US
Dollar spiked higher following the strong US NFP report on Wednesday
as the market pared back slightly Fed rate cut bets, but surprisingly gave back
all the gains soon after. Maybe the market is still too convinced of more
labour market weakness to come, or it decided to wait for the US CPI. Whatever
the reason, the data since the start of the year has been clearly pointing to
improving conditions that do not justify further rate cuts.
Today, all
eyes will be on the US CPI report. The Fed doesn’t see the labour market
contributing to inflationary pressures given the lower wage growth and higher
productivity, so it could still cut rates solely based on more inflation easing
(barring a quick deterioration in the labour market).
If we get
an in-line or soft CPI, there shouldn’t be much change in terms of market
pricing as the two rate cuts expected by the market are already above the Fed’s
projection. Nonetheless, we could see a dovish type of reaction in the market
with the US dollar coming under some pressure.
On the
other hand, a hot report will likely trigger a stronger hawkish reaction
following the hot NFP report on Wednesday. In this case, the US Dollar would
likely rally across the board.
INR:
The Indian Rupee remains
on a bearish structural trend against the US Dollar, but the recent positive
developments on the tariffs and inflation front gave the INR a boost. In fact, the
US and India finally reached a trade deal and President Trump announced that he
will lower the tariffs from 25% to 18%.
The RBI held interest
rates steady at the last meeting and yesterday we saw inflation rising further in
January to 2.75% from 1.33% in December, beating the 2.5% forecast. This should
push rate cuts aside for the time being.
USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDINR – daily
On the daily
chart, we can see that USDINR is rejecting the lower bound of the channel as the dip-buyers
continue to step in to position for a rally into the upper bound of the channel
around the 93.00 handle. The sellers will want to see the price breaking lower
to open the door for new lows with the 89.50 level as the first target.
USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDINR – 4 hour
On the 4 hour
chart, we can see a strong resistance zone around the 91.00 handle where we have
also the confluence with a downward trendline. The buyers will want to see the
price breaking higher to increase the bullish bets into new highs. The sellers,
on the other hand, will likely step in around the resistance with a defined
risk above it to target a break below the lower bound of the channel.
USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDINR – 1 hour
On the 1 hour
chart, there’s not much we can add here as the buyers will continue to step in
around the lower bound of the channel and look for a break above the resistance
to increase the bullish bets into new highs. The sellers, on the other hand,
will look for short opportunities around the resistance and pile in with more
conviction on a break below the lower bound of the channel.
UPCOMING CATALYSTS
Today we conclude the week with the US CPI report.
