The Indian rupee opened firmer against the US dollar, extending a third straight session of gains as USD\/INR fell 0.25% to about 95.15, its lowest in more than three weeks. The move followed a ceasefire between the US and Iran that pushed oil prices lower, with the MCX crude contract expiring 19 August down over 6% to roughly Rs 7,600 in early trading. Over the weekend, planned US attacks on Iran were suspended after Tehran agreed terms linked to the nuclear deal and the reopening of the Strait of Hormuz, a route for almost 20% of global energy supply; Indian equities tracked the improved risk tone, with the Nifty50 up 0.7% near 24,555.<\/p>\n
Attention now turns to Wednesday\u2019s Reserve Bank of India decision, where the repo rate is expected to be held at 5.25%. In the US, the dollar index slipped 0.1% to around 99.70 even as markets priced a 67.7% chance of a Federal Reserve hike in September. Data due include July NFP on Friday and ISM Manufacturing PMI, forecast at 54.0 versus 53.3 in June; technically, USD\/INR is below the 20-day EMA at 95.75, with RSI at 42, support at 94.78 then 94.15.<\/p>\n
We recommend that currency derivative traders short the USD\/INR pair or buy put options, targeting the immediate support level of 94.78 and potentially 94.15. The pair is trading well below its 20-day exponential moving average of 95.75, and the Relative Strength Index at 42 confirms that bearish momentum is firmly in control. Historically, when the Indian Rupee breaks below key short-term moving averages during oil price relief rallies, it tends to sustain gains for several weeks.<\/p>\n
In the energy markets, we advise traders to maintain a short bias on MCX Crude Oil futures following the sudden 6% drop to around Rs. 7,600. The reopening of the Strait of Hormuz, which controls nearly 20% of the world’s petroleum liquid consumption, removes the heavy geopolitical risk premium that previously inflated prices. This sudden supply safety net means any short-term price rebounds should be treated as prime selling opportunities.<\/p>\n
We suggest taking long positions on Nifty50 index options or futures, capitalizing on the index’s climb to 24,555. Historically, a $10 per barrel decline in crude oil prices reduces India’s import bill by roughly $10 billion and shaves nearly 0.5% off domestic inflation. This macroeconomic relief will likely boost corporate margins, making bullish call spreads on the Nifty highly attractive before the RBI’s upcoming policy announcement. <\/p>\n
We must also prepare for heightened volatility on Wednesday when the Reserve Bank of India is widely expected to keep the repo rate steady at 5.25%. While domestic core inflation remains under control, traders should hedge their positions ahead of Friday’s US Nonfarm Payrolls data. With a 67.7% probability of a Federal Reserve rate hike in September, any brief dollar recovery could offer a better entry point for our long-rupee strategies.<\/p>\n\n\n\n