Dollar Strength Returns
The Dollar had gained in recent weeks due to demand for safe-haven assets amid Middle East conflict and higher energy prices. Higher oil prices also reduced expectations for Federal Reserve rate cuts this year. In India, foreign outflows weighed on the Rupee. In March, Foreign Institutional Investors were net sellers on all trading days and sold Rs. 97,195.12 crore of holdings. India’s March flash Composite PMI fell to 56.5 from 58.9 in February, reflecting slower activity in manufacturing and services. A correction later confirmed the figure was 56.5, not 56.9. Technically, USD/INR held above the 20-day EMA near 92.70, with RSI above 70. Support levels were cited at 92.70, 92.00, and 91.40, with resistance at 94.50 and 95.20.Outlook For Usd Inr
The US Dollar is regaining its strength against the Indian Rupee after a brief pause, driven by renewed geopolitical uncertainty in the Middle East. With Iran denying any negotiation talks, the initial relief rally in the Rupee has faded. This situation puts the safe-haven US Dollar back in the driver’s seat. We have seen this kind of dollar strength before, particularly during the Federal Reserve’s aggressive rate-hiking cycle back in 2022. The current US Dollar Index level near 99.30 reflects a market that is pricing in persistent global risks and is hesitant to bet against the greenback. This environment makes it very difficult for emerging market currencies to perform well. Elevated energy prices are a major concern, as the ongoing conflict is expected to keep supply tight for the foreseeable future, with Brent crude prices staying above $110 a barrel. We know India imports over 85% of its crude oil needs, so these high prices put direct and sustained pressure on the Rupee by widening the country’s trade deficit. On the domestic front, the picture is also turning less favorable for the Rupee. Foreign investors have aggressively sold Indian assets this month, pulling out over Rs. 97,000 crore, which is a significant outflow. This, combined with a recent slowdown in business activity as shown by the flash PMI dropping to 56.5, suggests weakening economic momentum. From a technical standpoint, the USD/INR trend is clearly upwards, holding firmly above the key 20-day moving average support at 92.70. For traders using derivatives, this suggests buying call options on the USD/INR pair during any small price dips. The strong momentum indicates that pullbacks are likely to be shallow and seen as buying opportunities. The next immediate target to watch on the upside is the 94.50 resistance level, with a further potential move towards 95.20 if the current drivers remain in place. As long as the pair holds above the 92.70 support level, the path of least resistance for the Rupee is down. Create your live VT Markets account and start trading now.
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