FUNDAMENTAL
OVERVIEW

USD:

The US dollar extended the gains across the board in the final part of last
week as markets started to grow impatient amid the prolonged US-Iran stalemate and
Strait of Hormuz closure. Treasury yields came into spotlight as they broke
March highs on increasing inflation worries and potentially hawkish Fed.

The Fed is slowly abandoning the easing bias with more and more
policymakers talking about the need of keeping all options on the table, and
some explicitly bringing up rate hikes. In the short-term, the reopening of the
Strait could weigh on the greenback as oil prices will likely fall quickly and
rate cut bets will increase.

After that though, the focus will quickly turn back to the Fed and the
economic data. With the end of the war, the increase in economic activity could
keep inflation higher for longer and eventually even require rate hikes to
bring it sustainably back to the 2% target that the Fed has been missing since
2021.

There’s also another scenario where the Strait remains closed for longer
and oil prices stay elevated, with the risk that the Fed turns hawkish anyway
and gives the greenback a strong boost given the bearish positioning on the
dollar.

INR:

On the INR side, the
prolonged US-Iran stalemate and reports of potential resumption of hostilities
continued to weigh on the Indian Rupee, which dropped to new record lows
against the dollar.

In the short-term,
the Rupee has been closely correlated with oil prices, so positive developments
on the US-Iran front should keep giving the INR a boost. Conversely, extended
stalemate or further escalations will likely keep weighing on the currency and
push it into new record lows.

In the big
picture, the Indian Rupee remains on a bearish structural trend against the US dollar,
so the dip-buyers will likely 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 USDINR broke above the March high and extended the rally amid the prolonged
US-Iran stalemate. If the price were to fall back below the 96.00 support, we
can expect the sellers to extend the pullback into the trendline around the
95.00 handle.

USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour
chart, we have a minor upward trendline defining the current bullish momentum.
The buyers will likely continue to lean on the trendline with a defined risk
below the support to keep pushing into new highs. The sellers, on the other
hand, will want to see the price breaking below the support to pile in for a
drop into the major trendline.

USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour
chart, there’s not much we can add as from a risk management perspective, the
buyers will have better risk to reward setups around the trendline or the
support. The sellers, on the other hand, will need to wait for a break below
the support as there’s no fundamental backing for a correction at the moment.

UPCOMING CATALYSTS

On Wednesday,
we have the FOMC meeting minutes. On Thursday, we get the latest US Jobless
Claims figures and the US Flash PMIs.