- The Indian Rupee gains further, capitalizing on a correction in oil prices and the US Dollar.
- US President Donald Trump pauses attacks on Iran to allow time for diplomacy.
- Investors expect the Fed to leave interest rates unchanged on Wednesday.
The Indian Rupee (INR) extends its recovery against the US Dollar (USD) at the start of the Federal Reserve’s (Fed) monetary policy week. The USD/INR pair falls further to near 96.10 as the pause in military aggression between the United States (US) and Iran has weighed heavily on oil prices and has diminished the safe-haven appeal of the US Dollar.
In the opening trade, the MCX Crude Oil contract expiring on August 19 trades 4.75% lower to near Rs. 8,200.
The appeal of currencies from economies, such as India, which rely heavily on oil imports to fulfill their energy needs, improves when oil prices fall sharply.
Meanwhile, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.25% lower to near 101.25.
US holds strikes on Iran on exhaustion of target list
Two-week-long exchange of attacks between the US and Iran paused over the weekend as Washington confirmed that further military aggression would be unnecessary, confirming that the target list has been exhausted.
According to Axios, Adm Bradley Cooper, the top US military commander in the region, had told Trump the US military campaign had reached the limits of its effectiveness, The Guardian reported. Cooper added that there was little point in continuing the bombing campaign without a return to major combat operations.
In response, Iran also paused attacking US bases in its neighbouring nations, but confirmed that its position remains “attack for attack”.
Meanwhile, US ambassador to the United Nations (UN), Mike Waltz, also told Fox News on Sunday that President Donald Trump had decided to pause US attacks to allow more time for diplomacy, Reuters reports. This has renewed hopes for diplomatic efforts between both nations.
Investors await key Fed policy
This week, the major trigger for global markets will be the Federal Reserve’s (Fed) monetary policy announcement on Wednesday, in which the central bank is expected to leave interest rates unchanged in the range of 3.50%-3.75%. So far this year, the Fed has not done any monetary policy adjustments.
Investors will pay close attention to the monetary policy statement and Fed Chair Kevin Warsh’s press conference to get fresh cues regarding inflation and the economic outlook. Warsh is unlikely to deliver any remarks regarding the monetary policy guidance, as he clarified in its last press conference that “so-called forward guidance is not well-suited in the current policy juncture”.
Technical Analysis: USD/INR falls toward 20-day EMA
USD/INR trades lower at around 96.26 at press time. The pair remains underpinned by a constructive near-term bias, with spot holding above the 20-day Exponential Moving Average (EMA) at 95.9851.
The mildly positive 14-day Relative Strength Index around 57 suggests ongoing bullish momentum, though not yet in overbought territory, allowing room for further gains while the price action stays supported above the short-term EMA.
On the downside, immediate support is now seen at the 20-day EMA near 95.99, which protects the recent advance; a daily close below this level would hint at a deeper corrective phase toward prior price congestion. Looking up, the all-time high at around 97.10 will be the key resistance level.
