The Indian Rupee (INR) has strengthened amid a positive US-India trade deal and falling crude oil prices. India is a major oil consumer, so lower oil costs help improve the currency’s outlook. However, tensions with Pakistan following missile tests and accusations of backing an attack in Kashmir may impact the Rupee negatively.

In the coming days, focus will shift to the US ISM Services PMI and the Federal Reserve’s interest rate decision, with markets predicting no change in rates. Additionally, India’s foreign exchange reserves climbed by $1.983 billion to $688.129 billion, marking an eighth consecutive weekly increase.

The INR maintains a bearish tone against the USD. The 14-day RSI is below 30.00, indicating oversold conditions, with further consolidation possible. A break below the descending trend channel could target 84.22, while an upside move could aim for 85.14 and 85.70.

The Indian Rupee’s value is influenced by crude oil prices, the US Dollar, and foreign investment. The Reserve Bank of India (RBI) intervenes in forex markets to support the Rupee and maintain inflation targets by adjusting interest rates. Macroeconomic factors such as inflation, interest rates, GDP growth, and trade balance also affect the Rupee’s strength.

As we look ahead, there’s a tangible sense of caution running through price forecasts, shaped largely by the narrow room left for surprise moves from central banks. The Federal Reserve’s decision isn’t expected to bring a rate revision, and that in itself carries implications: the markets have already priced in a pause. That leaves traders focusing more on the wording in the statement and Powell’s tone – both could sway currency reaction more than the rate move itself.

The Rupee’s uptick, driven by the lower global oil price and a somewhat rosier short-term trade outlook after recent discussions with Washington, appears to be losing steam. However, the surge in Forex reserves shows a banking system flush with dollars, offering more firepower to keep volatility in check. The strength of this trend depends on whether those reserves are used as a defence mechanism against fresh selling pressure or simply reflect routine valuation gains.

On the technical side, the RSI below 30 suggests sellers may be getting tired, but that doesn’t confirm a shift just yet. Prices remaining inside the descending channel reflect how persistent the broader downtrend has been. Unless that channel is convincingly broken on higher volume, we may only be watching minor rebounds rather than a full recovery. Below 84.22, we expect renewed weakness, while above 85.70 opens scope for a tactical retracement. Anything in between can be noise unless tied to external catalysts.

Regarding macro forces, inflation readings at home have stabilised somewhat, giving the central bank breathing space. But we mustn’t ignore that the RBI’s approach to Forex intervention has tilted more active in the past few weeks. This can serve as both a cushion and an anchor, depending on what global risk sentiment does next.

Political tensions in the neighbourhood can’t be discounted entirely. If they escalate, they could make foreign buyers pause, introducing volatility through reduced inward capital flow. It’s not the dominant driver now, but it would be a mistake to overlook.

For positioning in contracts tied to the USD/INR pair, strategies requiring tight stops may find present conditions less forgiving. If price remains in this narrow range and volatility compresses further, premium selling strategies might begin to look more attractive. Volatility metrics, though subdued, may pick up quickly depending on the Fed’s tone or energy market spillovers.

We will continue tracking any divergence between spot and forward market sentiment. Right now, a sustained move through the identified resistance or support zones, when tied with volume and rate expectations, should guide short-term directional bias. The quality of that move matters more than its size, especially with markets hungry for new narratives.