The rupee opened weaker against the US dollar, with USD/INR rebounding to about 95.25 as oil extended gains and the dollar stabilised after a soft end to last week. MCX crude futures for August 19 were up more than 1% at Rs 7,500, a move that tends to pressure oil-importing currencies. The US Dollar Index (DXY) was 0.1% higher near 99.70, tracking the greenback against six major peers, while uncertainty over navigation through the Strait of Hormuz—handling almost one-fifth of global energy supply—supported crude.
Expectations for US monetary policy shifted after weaker labour data and changing rate pricing. CME FedWatch put the probability of a Federal Reserve rate rise in September at 46%, down from 67% a week earlier, after July nonfarm payrolls showed 23K job losses versus forecasts for 80K gains; June payrolls were revised to 20K from 57K. The dollar’s earlier drop took DXY to an almost eight-week low of 99.40, while USD/INR remained below its 20-day EMA of 95.53, with RSI around 45 and downside markers at 94.83 and 94.15.
Energy Futures and Crude Oil Trading Strategies
We suggest derivative traders focus on long call options or bull call spreads for MCX crude contracts expiring on August 19. With geopolitical tensions rising due to the Strait of Hormuz disruption, energy futures are highly likely to break past Rs. 7,500 and test higher resistance. Historically, sudden supply shocks in the Middle East have caused crude prices to spike by 5% to 8% in a matter of weeks.
USD/INR Positioning and Dollar Outlook
For the USD/INR pair, we recommend traders utilize bear call spreads or look to buy put options targeting the 94.83 support level. While higher oil prices generally weaken the Indian Rupee, the currency pair is currently capped below its 20-day Exponential Moving Average of 95.53. This technical resistance, combined with a subdued Relative Strength Index of 45, suggests that upward moves will remain limited.
We also advise positioning for a weaker US Dollar as we head into the late August trading sessions. The latest US Nonfarm Payrolls report revealed an unexpected loss of 23,000 jobs, causing the market to slash September rate hike expectations to just 46%. This massive slowdown in the US labor market makes sustained rallies in the Greenback highly unlikely in the near term.
Finally, we recommend using defined-risk strategies like iron condors to exploit the current range-bound momentum before a larger breakout occurs. Traders should avoid heavy directional bets until the USD/INR either breaks above the 95.53 level or slides past the June low of 94.15. Keeping position sizes small will protect portfolios against any sudden oil-driven volatility.
