The Indian Rupee extends the losses amid US-Iran stalemate with record lows in sight
The Indian Rupee (INR) is under significant pressure, primarily driven by geopolitical tensions surrounding the US-Iran stalemate, which has pushed oil prices back into triple digits. Per the full note from Giuseppe Dellamotta, the USD has regained strength as the situation remains unresolved, and the Fed's upcoming policy decision could further influence the dollar's trajectory. The desk anticipates that the INR will continue to face downward pressure, with potential record lows on the horizon if the geopolitical landscape does not improve. This aligns with our broader bearish outlook on the INR against the USD, particularly as the Fed may adopt a more hawkish stance in light of resilient US economic data.
What the desk is arguing
The desk posits that the Indian Rupee is likely to extend its losses against the US dollar due to ongoing geopolitical tensions, particularly the US-Iran stalemate affecting oil prices. Per the full note source, the INR has erased gains from earlier in the month and is approaching record lows, with the potential for further declines if the situation remains unresolved.
Supporting this view, the USD has shown renewed strength, bolstered by the prospect of the Federal Reserve potentially adopting a more hawkish tone in response to robust US economic data. The FOMC policy decision today could serve as a catalyst, with a hawkish surprise likely to amplify the dollar's gains and exacerbate the INR's decline.
Where it sits in our coverage
Our consensus target for USD/INR is 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)
This view aligns with jpmorgan, which is positioned at the upper end of our consensus range, suggesting a bearish outlook for the INR against the USD as geopolitical risks persist.
How other firms see it
Firms like jpmorgan and citi share a similar bearish outlook on the INR, anticipating continued weakness against the USD. Conversely, bofa presents a contrary view, expecting a stronger INR in the near term.
Market participants should also keep an eye on related currency pairs such as EUR/USD, which may reflect the broader sentiment towards the dollar, as well as the implications of the Fed's policy decisions on global currencies.
What the calendar says
With the FOMC policy decision today and key US economic data releases scheduled for the coming days, including Q1 GDP and Employment Cost Index, these events could significantly impact market sentiment and the USD's strength against the INR.
Key takeaways
- 01The INR is under pressure due to geopolitical tensions, particularly the US-Iran stalemate.
- 02The USD has regained strength, with potential for further gains if the Fed adopts a hawkish stance.
- 03Record lows for the INR are possible if the geopolitical situation does not improve.
- 04Key economic data releases this week could influence market sentiment.
Market implications
Watch for the USD/INR to test the all-time high around 96.00, as a break above this level could lead to further bullish momentum. The FOMC policy decision today is a critical event that could shape the dollar's trajectory and impact the INR's performance.
FUNDAMENTAL OVERVIEW USD: The US dollar regained some ground to start the week as the prolonged US-Iran stalemate has taken oil prices back into triple digit levels. That looks unlikely to change anytime soon as Trump has rejected Iran’s proposal to first open the Strait of Hormuz and then hold nuclear talks. Unfortunately, with US stock prices at all-time highs Trump might not feel any pressure to concede.
This might even set the stage for the next US dollar rally if the Strait of Hormuz remains closed for much longer and oil prices stay elevated, thus forcing the Fed to hike interest rates in the coming months. Today, we have the FOMC policy decision and although the Fed is expected to keep everything unchanged amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to resilient US data and a longer than expected US-Iran war. A neutral Fed shouldn’t bring much volatility, but a more hawkish one could give the greenback a boost.
INR: On the INR side, the US-Iran stalemate led to another selloff with the Indian Rupee erasing all the gains since the start of the month and now approaching the record lows. The currency will likely remain under pressure as long as the situation in the Strait of Hormuz remains unresolved. 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 into new highs.
USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAME On the daily chart, we can see that USDINR extended the gains yesterday on broad US dollar strength. The natural target for the buyers is the all-time high around the 96.00 handle. If the price gets there, we can expect the sellers to step in with a defined risk above the level to position for a drop back into the 94.00 level.
The buyers, on the other hand, will look for a break to increase the bullish bets into new record highs. USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME On the 4 hour chart, we have an upward trendline defining the current bullish momentum. We can expect the buyers to 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 look for a break to pile in and target a drop back into the 94.00 support. USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME On the 1 hour chart, there’s not much we can add here as the buyers will likely continue to lean on the trendline to keep pushing into new highs, while the sellers will wait for a break to open the door for new lows. UPCOMING CATALYSTS Today we have the FOMC policy decision.
Tomorrow, we get the US Q1 GDP, the US Employment Cost Index and the latest US Jobless Claims figures. On Friday, we conclude the week with the US ISM Manufacturing PMI. This article was written by Giuseppe Dellamotta at investinglive.com.
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