A recent report by OCBC Bank, authored by Sim Moh Siong and Christopher Wong, examines the Indian Rupee’s gain following news of a US-India trade agreement. They caution, though, that the lack of detailed specifics might curtail prolonged effects as focus shifts to other economic factors.
The report indicates that the US dollar to Indian Rupee (USD/INR) was recently trading at 90.3 levels. Daily momentum showed a mild bearish trend, with the Relative Strength Index nearing oversold conditions, while there is support at 90 levels from the 23.6% Fibonacci retracement of the 2025 low to the 2026 high.
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The recent trade deal news has given the Rupee a boost, pushing the USD/INR pair down to test a critical support level. We are now watching the 90.0 mark very closely, as it represents a significant technical floor based on the 2025 low to the recent 2026 high. A break below this level could signal further INR strength.
However, we see that underlying fundamentals paint a mixed picture, which the market will likely refocus on once the initial optimism fades. India’s final quarter of 2025 showed robust GDP growth of 8.4%, but consumer price inflation remained stubbornly above the Reserve Bank of India’s comfort zone, last reported at 5.7%. This persistent inflation may limit the central bank’s policy options.
This mixed data suggests the rally might be fragile, especially with the US Federal Reserve having held rates steady at a 24-year high throughout 2025. The interest rate difference between the US and India, therefore, continues to provide underlying support for the dollar. This dynamic could cause the sentiment-driven INR strength to reverse quickly.
For those who believe the downward momentum for USD/INR will continue, buying short-dated put options with a strike price just below 90.0 is a prudent strategy. This position would profit from a breakdown while clearly defining your maximum risk if the support holds. It is a way to play the current bearish sentiment without overcommitting capital.
Conversely, with the Relative Strength Index (RSI) nearing oversold territory, a bounce from the 90.0 support is also a strong possibility. Traders anticipating a reversal could consider buying call options to position for a move back towards the 90.3 level and higher. Using a bull call spread would be a cost-effective way to express this view.
Implied volatility on the pair has been trending lower, hitting levels last seen in late 2025, which suggests the market may be underpricing the risk of a sharp move. This environment makes strategies like long straddles or strangles attractive for capturing a potential breakout in either direction. The lack of specific details in the trade deal means uncertainty is high, and volatility could soon return.
