The Indian Rupee strengthened as markets reacted to the US-Iran deal, easing oil prices and reducing Fed rate hike expectations. Technical levels and upcoming catalysts ahead.
Market Overview
The US dollar weakened broadly on Thursday after former President Trump canceled planned military strikes on Iran and signaled a potential deal within days. The announcement reduced geopolitical risk premiums, triggering a sharp decline in oil prices and easing inflation concerns. Fed rate hike expectations were trimmed, with markets now pricing in 16 basis points of tightening by year-end, down from 24 bps prior to the deal.
Fed Policy Implications
The Federal Reserve's upcoming FOMC meeting on Wednesday will be critical. While the central bank is expected to hold rates steady, traders will scrutinize its economic projections and dot plot for clues on future policy. A hawkish tone could pressure the Rupee, as it would likely strengthen the dollar. However, easing inflation pressures may allow the Fed to maintain a cautious stance.
INR Technical and Fundamental Outlook
The Indian Rupee rallied strongly, extending gains amid optimism over the US-Iran agreement. The currency's correlation with oil prices remains a key driver, as lower crude costs reduce import costs and support the Rupee. Despite short-term strength, the USD/INR pair retains a bearish structural trend. Traders may target the 94.00 level on the daily chart as the next support zone.
Technical Analysis
On the daily timeframe, USD/INR broke below a key trendline, signaling short-term bearish momentum. The 4-hour chart shows a pullback, with sellers likely to re-enter below trendline resistance. The 1-hour chart highlights a minor downward trendline, with buyers needing a break above to target the 96.00 handle.
Upcoming Catalysts
Wednesday's FOMC decision and Thursday's US Jobless Claims data will shape near-term direction. Oil price movements and geopolitical developments also remain critical for risk sentiment and currency flows.
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