The Indian rupee eased against the US dollar on Thursday, pushing USD/INR to about 95.22 after it rebounded from a fresh monthly low of 94.83 set a day earlier. Oil prices firmed, with the MCX crude contract expiring on 19 August up 1.2% to around Rs. 7,200, though it remained close to Wednesday’s three-week low of Rs. 7,078. Iran and Oman were reported to be close to finalising a framework for navigation through the Strait of Hormuz, while a senior Gulf official put the probability of an agreement by Friday at 50%; separate reports pointed to continued disruptions risk via attacks on tankers in the Red Sea route and the Gulf of Aden.
On policy, the Reserve Bank of India kept the repo rate unchanged at 5.25% for a fourth consecutive meeting, cut its current-year inflation forecast to 5%, and flagged core pressures potentially rising to 5.9% in the third quarter. Attention now turns to Friday’s US Nonfarm Payrolls release for July; TD Securities forecasts 70k after 57k in June, with the unemployment rate seen steady at 4.2%. In technical trade, USD/INR sat near 95.16, below the 20-day EMA of 95.60, with RSI around 42; resistance is at 95.60 and 96.00, while support is at 94.83 and 94.15.
Derivative Strategy and Technical Outlook
We suggest derivative traders watch the 95.60 level closely, as the USD/INR remains in a bearish trend below its 20-day exponential moving average. Since the pair recently bounced from 94.83 to 95.22, selling call options near the 95.60 resistance could be a highly effective strategy in the coming weeks. If the support at 94.83 breaks, we expect a rapid slide toward the next major support floor at 94.15.
We must also prepare for heavy volatility in MCX crude contracts as the market reacts to geopolitical developments in the Middle East. The Strait of Hormuz is a massive global trade artery, carrying roughly 20.5 million barrels of oil per day, which accounts for about 20% of global petroleum liquid consumption. If Oman and Iran finalize their navigation agreement, crude prices could slide back toward their three-week lows of Rs. 7,078, making short-term put options on August contracts an attractive play.
Domestic Factors and Macro Event Watch
On the domestic front, the Reserve Bank of India’s decision to hold the repo rate at 5.25% provides a stable backdrop for the local currency. Historically, the RBI has used its massive foreign exchange reserves, which hit record highs of over $670 billion, to aggressively defend the rupee from sudden depreciation. This massive financial cushion suggests that any sudden spikes in the USD/INR will likely be capped by central bank intervention, favoring range-bound trading strategies.
Finally, we advise traders to keep a close eye on Friday’s US Nonfarm Payrolls data, which is anticipated to show a modest addition of 70,000 jobs. A weaker-than-expected jobs report could pressure the US Dollar globally, pushing the USD/INR pair firmly below the 94.83 support level. To hedge against this event, buying near-the-money put options on the USD/INR before the weekend could yield strong returns if the US labor market shows further signs of cooling.
