The Indian rupee has faced challenges in 2025 due to global uncertainties and rising import costs. Higher oil prices and reduced foreign investment have further weakened the currency. The Reserve Bank of India (RBI) has allowed for more market-driven changes, causing the rupee to fall to nearly 91 against the U.S. dollar. This decline has raised import costs and increased inflation. While exporters benefit, consumers and businesses that depend on foreign parts are paying more. In 2026, the rupee is likely to stay pressured. High global interest rates may lead to more foreign capital leaving the country. However, robust service exports and digital growth could help slow the decline. The RBI is expected to act carefully to avoid sudden changes. An increase in manufacturing and controlled inflation could stabilize the rupee by the end of the year. Global oil prices and trade deals will be crucial in shaping the rupee’s future.

Technical Analysis Outlook

Technical analysis shows that USDINR is likely to keep rising as wave ((v)) approaches a target between 89.06 and 90.72. The rupee is nearing a resistance zone, indicating that wave 3 may end soon, leading to the start of wave 4. Wave 4 is expected to test support levels before continuing the bullish trend in wave 5, suggesting a positive long-term outlook for USDINR. With the rupee steadily falling towards 91 against the dollar, fundamental pressures are strong. India’s consumer price index for September 2025 was 6.1%, well above the RBI’s comfort level, raising inflation worries. This issue is aggravated by Brent crude prices remaining above $95 per barrel since August 2025, which directly affects our import costs. The technical analysis hints that we are close to a temporary peak that could end a significant upward wave. For derivative traders, this may indicate a short-term reversal or pullback for the USD/INR pair in the upcoming weeks. This could create opportunities for a counter-trend strategy as the dollar’s momentum is predicted to slow down.

Trading Strategies and Market Outlook

Traders can look to profit from a temporarily stronger rupee by buying near-term Indian rupee (INR) call options or U.S. dollar (USD) put options. The analysis suggests that a corrective wave 4 could retest earlier support levels of around 84-85. This provides a clear, though temporary, target for such trades. However, we should be cautious about a possible extension of the current upward trend, which would delay any pullback and further weaken the rupee. Foreign Portfolio Investors have withdrawn over $4 billion from Indian markets in the third quarter of 2025, and more outflows could strengthen this upward movement. The long-term outlook still indicates a weaker rupee after this expected correction. The RBI’s current hands-off approach is crucial, marking a shift from the heavy interventions we observed in 2023 to defend the 83 level. This suggests a larger tolerance for currency depreciation to protect foreign exchange reserves. Therefore, any temporary strength in the rupee should be seen as part of a broader, long-term weakening trend. Create your live VT Markets account and start trading now.

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