Indian Rupee detaches from reality after multiple RBI interventions; Iran war and US CPI in focus

FUNDAMENTAL OVERVIEW USD:The US dollar spiked to the upside on Friday after the US NFP report showed job growth in August almost tripling the consensus estimate of 56K. The dollar gains didn’t last long, though, as most of the NFP-driven moves got faded thereafter. This happened because the market focus was not on the NFP report, but on the CPI. The market pays attention to the data that the central bank is focused on, and the Federal Reserve is currently focused on inflation. In fact, just a day before the NFP report, Fed’s Waller mentioned that he would support keeping interest rates unchanged at the upcoming FOMC meeting, but a hot CPI would make him consider a rate hike. This week is all about the US CPI data. Unless, we get some surprising breakthrough in US-Iran relations, the price action will likely remain mostly rangebound or a bit positive for the greenback as traders hedge into the main event. INR:On the INR side, the currency has been completely detached from reality in the past week, as it rallied despite another increase in oil prices and a relatively stable US dollar. This might have been the result of a series of RBI’s interventions, as we saw three strong spikes without any positive catalyst for the rupee. According to Reuters, bankers said the central bank had been increasingly active before the formal market opening, followed by interventions throughout the trading days.Previously, the RBI largely stepped in to curb weakness in the ​rupee, and more recently it appears to be using its intervention to push the currency higher.Therefore, we will likely see dip-buyers in the USD/INR pair stepping in soon, as intervention gains get usually faded without a change in fundamentals, although a negative US CPI on Friday could weaken the US dollar across the board.In the short-term, the INR will continue to be driven by oil prices and the hawkish/dovish repricing in Fed interest rate expectations. Therefore, the pair might keep trading in the wide range for longer until the US and Iran find an agreement and the Strait of Hormuz is reopened. In the big picture, the Indian Rupee remains on a bearish structural trend against the US dollar, so dip-buyers will continue to look for opportunities around strong major technical levels to keep pushing the USD/INR pair into new highs.  USDINR TECHNICAL ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can see that USDINRdropped all the way back to June lows on a series of RBI interventions. If we get another push lower, the buyers will likely step in around the key 94.00 handle with a defined risk below it to position for a rally into new record highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 92.65 level next.USDINR TECHNICAL ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can see the price is breaking above the downward trendline that was defining the bearish momentum. We can expect the buyers to pile in around these levels with a defined risk below the recent low to target a pullback into the major downward trendline. The sellers, on the other hand, will want to see the price falling back below the trendline to extend the drop into the 94.00 handle.USDINR TECHNICAL ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, there’s not much we can add here, but there’s a minor resistance around the 94.80 level. That’s where we can expect the sellers to step in with a defined risk above the resistance to keep pushing into new lows, while the buyers will look for a break to increase the bullish bets into the major downward trendline around the 95.40 level.UPCOMING CATALYSTSOn Thursday, we get the US PPI report and the US Jobless Claims figures. On Friday, we conclude the week with the US CPI report. This article was written by Giuseppe Dellamotta at investinglive.com.