The rupee pared early advances against the dollar after the Reserve Bank of India kept policy unchanged. USD/INR opened near the monthly low around 94.80 on softer oil, before rebounding to about 95.12 and later trading near 95.06. The RBI held the repo rate at 5.25% for a fourth straight meeting and retained a neutral stance, with June CPI inflation at 4.4% YoY still inside the 2%–6% band. The bank projected core inflation at 5.9% YoY in Q3 before easing to 5.5% YoY in Q4, while flagging volatility in crude, currencies and broader markets linked to the West Asia conflict.
Oil extended losses on hopes of a US–Iran agreement over the Strait of Hormuz, which carries almost 20% of global energy supply, and India’s MCX August 19 crude contract was down 1.6% near Rs. 7,100. Attention also turned to US ADP payrolls for July due at 12:15 GMT; Deutsche Bank forecast +65k versus +49k previously, a release that can shape Fed rate pricing. Technically, USD/INR remained below the 20-period EMA at 95.6394 with RSI at 40.6; resistance sat near 95.64, while support levels were 94.80 and the June low at 94.15.
Bearish Momentum in USD/INR and Derivatives Strategy
With USD/INR trading below its 20-period exponential moving average of 95.64 and exhibiting a bearish RSI of 40.6, we see strong downward momentum targeting the 94.80 support level. We recommend derivative traders focus on bear put spreads on the USD/INR pair to capitalize on this bearish bias without overexposing to sudden volatility. Historically, when the pair breaks below key monthly support levels, it often slides rapidly toward the next major floor at the June low of 94.15.
The Reserve Bank of India’s decision to keep the repo rate steady at 5.25% reflects confidence in a robust economy, especially after a stellar Q1 FY27 performance where GDP growth is estimated to hover around 7%. Given that domestic inflation remains well contained at 4.4%, the rupee’s underlying strength is well-supported compared to other emerging market currencies. We advise traders to look at long rupee positions in the futures market, leveraging the stable yield differential.
Trading Oil and Monitoring US ADP Impact
As hopes of a US-Iran agreement over the Strait of Hormuz push MCX crude oil prices down to near Rs. 7,100, energy derivative traders should prepare for sharp moves. Historically, a resolution of shipping bottlenecks in this vital passage, which handles nearly 20% of global oil, has led to a quick 5% to 10% drop in crude benchmarks. We suggest utilizing short near-month MCX crude contracts or buying put options to capture this potential downside.
All eyes are on today’s US ADP payroll data, where a projected rise to +65k from +49k will heavily influence the Federal Reserve’s next interest rate decisions. A stronger-than-expected print could temporarily push the USD/INR back toward the 95.64 resistance zone, creating an optimal entry point for fresh short positions. We must closely monitor these US labor metrics as any sudden swings will test the current support levels in the currency market.
