The rupee extended gains for a third session, pushing USD\/INR down towards 95.65 as softer crude prices eased pressure on India\u2019s external balances. On the MCX, the August 19 crude contract fell 1.4% to about Rs 7,848, its lowest in a week. With India importing 85% of its energy needs, cheaper oil reduces foreign outflows and supports the currency, even as the Strait of Hormuz remained closed and energy supply conditions were described as not fully normalised.<\/p>\n
Markets also turned to monetary policy and growth signals. The Federal Reserve announces on Wednesday, with the CME FedWatch tool indicating a 62% probability that rates stay at 3.50%\u20133.75%, while pointing to a strong possibility of a September hike. On the domestic side, a Reuters poll forecast India\u2019s GDP growth at 6.6% YoY for the fiscal year ending March 2027, down from 7.7% in FY2025-26, before rising to 6.8% in FY2027-28; attention then shifts to the RBI decision next week. Technically, USD\/INR traded below the 20-day EMA at 95.93, with RSI at 50.6; resistance sits near 97.10 and support at 95.00.<\/p>\n
We suggest derivative traders closely watch the 95.00 support level for the USD\/INR pair, as the rupee’s recent strength has pushed the pair below its 20-day exponential moving average of 95.93. With the Relative Strength Index hovering near a neutral 50.6, we recommend deploying short-term bear call spreads to capitalize on this consolidation phase. However, traders should keep stop-losses tight just above the 95.93 resistance level to protect against any sudden reversals.<\/p>\n
Although falling crude oil prices have relieved pressure on the rupee, we must remain cautious because the critical Strait of Hormuz remains closed. Historically, India imports nearly 85% of its oil, making the rupee highly sensitive to energy shocks like the 2022 crisis when Brent crude soared past $120. To hedge against sudden oil spikes that could drag the rupee down, we favor buying out-of-the-money USD\/INR call options as a protective measure.<\/p>\n
With the Federal Reserve’s rate decision this week and the Reserve Bank of India meeting next week, we expect a sharp rise in market volatility. Current pricing shows a 62% probability that the Fed will hold interest rates at 3.50%-3.75%, but any hawkish surprise could quickly weaken the rupee. We advise traders to focus on volatility-buying strategies, such as long straddles, to profit from sharp price swings regardless of the direction.<\/p>\n
Looking further ahead, India\u2019s economic growth is projected to slow to 6.6% this fiscal year from 7.7% last year, which may limit how much the RBI can support the currency. Fortunately, India’s strong foreign exchange reserves, which recently hovered near $650 billion, provide a solid cushion against capital outflows. For the coming weeks, we recommend trading the range between 95.00 and 96.50, utilizing weekly options to capture quick premium decay.<\/p>\n\n\n\n