Indian Rupee rebounds, road ahead remains rough
The Indian Rupee (INR) opens higher against the US Dollar (USD) on Thursday. The USD/INR pair drops to near 95.44 as the US Dollar ticks lower; however, the outlook of the pair remains bullish as renewed Middle East hostilities have boosted oil prices.
The higher oil prices narrative is unfavorable for the Indian Rupee, as currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil price environment.
In the opening trade, the MCX Crude Oil contract expiring on July 20 holds onto Wednesday’s gains near Rs.7,115. The MCX Crude Oil contract has gained over 10% from its multi-month low of Rs. 6,505 posted last week.
US-Iran MoU collapses
On Wednesday, United States (US) President Donald Trump announced that the memorandum of understanding (MoU) signed with Iran, aimed at ending the Middle East war, is over, after the exchange of attacks between both nations. The US Central Command launched a series of attacks on Iran’s military infrastructure on Tuesday after Tehran struck three commercial ships transiting through the Strait of Hormuz, a critical chokepoint to almost 20% of global energy supply.
Meanwhile, Middle East hostilities have increased as US military forces have started attacking Iranian infrastructure. Earlier in the day, Iranian state media reported that multiple US artillery shells struck a railway bridge west of Aghala in Golestan, triggering several explosions.
US Dollar drops despite hawkish FOMC minutes
The US Dollar trades marginally lower even as Federal Open Market Committee (FOMC) Minutes of the June policy meeting on Wednesday showed that policymakers continue to see “inflation as the dominant risk”. The minutes also showed that several officials believe further tightening could become necessary.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower to near 100.95.
FIIs continue to raise stake in Indian stock market
Foreign Institutional Investors (FIIs) continue to increase their stake in the Indian stock market despite renewed geopolitical risks. Overseas investors have remained net buyers in all last four trading days, and have raised their stake worth Rs. 3,954.35 crore.
Technical Analysis: USD/INR rises to near 95.50
USD/INR trades lower at around 95.44 at press time. However, the pair holds a bullish near-term bias as spot hovers above the 20-day exponential moving average (EMA) at 95.10. The pair is also holding the breakout of the Descending Triangle formation, while the Relative Strength Index (RSI) at 54.7 hints at moderately positive momentum rather than overbought conditions.
On the downside, initial support is seen at the 20-day EMA around 95.10, followed by the May 7 low at 94.03. On the topside, the next significant obstacle aligns with the descending resistance trendline starting near 97.08, which caps the broader advance and would need to be overcome to sustain a stronger bullish extension.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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