USDINR Inches Up As Market Weighs Middle East Ceasefire Amid Fed and RBI Actions

The USDINR currency pair trades flat in the Asian session, going at 85.92 at the time of writing as the dollar mounted a fightback after three sessions on the decline. The Israel-Iran ceasefire seems to be holding 24 hours after it was announced, diluting the US dollar’s safe haven strength. The rupee is strengthened by oil prices which initially declined but have returned to the upside in the early hours of Wednesday.

Benchmark Brent crude oil prices were up by 0.5% at the time of writing, trading at $68.50. Investors have been holding off from placing aggressive bets, as they weigh the sustainability of the ceasefire. However, the Reserve Bank of India’s interest rate cut in early June has limited the rupee’s upside.

Meanwhile, the dollar is supported by a hawkish Fed, with Chairman Jerome Powell stating that the economy is stable and the central bank is in no hurry to slash rates. Powell is currently giving his testimony in Congress and investors will be keen to pick cues from his speech. Also, USDINR faces downward pressure from the RBI’s move to announce a ₹1 trillion reverse repo auction. Specifically, the 7-day auction starts on June 27 and will absorb excessive liquidity in the short-term, helping stabilize the rupee, especially in forward premiums.

USDINR Prediction

USDINR pivots at 85.90 and action above that level favours the buyers to be in control. The upward momentum will likely meet initial resistance at 86.16. However, the pair could break above that level and test 86.36 in extension if the buyers extend their control.

On the other hand, breaking below 85.90 will favour the sellers to be in control. That will likely see the first support established at 85.76. The upside narrative will be invalid if the USDINR pair breaks below that level. That could trigger a stronger downward momentum to test 85.62.

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