The Indian rupee (INR) was barely moving against the US dollar (USD) during the afternoon trading session on Tuesday. The USD/INR pair hovered around 95.00, but the future of the Indian rupee remains uncertain as oil prices show signs of recovery amid ongoing tensions regarding the US-Iran agreement.
At the time of this update, WTI crude oil prices were down by approximately 1.25%, sitting near $90. However, they had surged more than 4.5% on Monday. Typically, currencies from countries like India, which are largely dependent on oil imports, tend to struggle when oil prices rise.
Negotiations for a deal between the US and Iran have been halted
Iran’s Tasnim news agency reported on Monday that members of the negotiating team in Tehran have ceased communications with the United States via intermediaries as a response to recent attacks in Lebanon.
Iran’s Parliament Speaker, Mohammad Berger Ghalibaf, posted on X, stating that the US naval blockade and alleged war crimes in Lebanon are clear signs of US disregard for the ceasefire. Additionally, Iranian Foreign Minister Seyyed Abbas Araghchi warned about potential severe consequences if military actions occur on any front, including Lebanon.
On a different note, US President Donald Trump reassured the markets during an ABC News interview, expressing optimism about the upcoming deal with Iran, which aims to extend the ceasefire and reopen the Strait of Hormuz. He mentioned that diplomatic “issues” that might have delayed progress have been swiftly addressed.
After hinting at influencing US-Iran relations, Donald Trump stated on Truth Social that the hostilities between Israel and Lebanon had come to a halt.
Anticipation for RBI policy announcement
The Reserve Bank of India’s monetary policy announcement, scheduled for Friday, is expected to play a crucial role for the Indian currency this week. The consensus seems to be that the RBI will maintain the repo rate at 5.25%, indicating a more hawkish outlook due to rising energy prices that heighten inflationary concerns. Investors are also likely to evaluate comments from Central Bank Governor Sanjay Malhotra regarding the economic outlook in the wake of the Middle East crisis.
FIIs were net sellers as of June 1st
Foreign institutional investors (FIIs) continued to be net sellers on June 1st, offloading shares worth Rs 200 crore in the Indian stock market. Foreign investments have been steadily declining. The ongoing energy supply shocks stemming from Middle Eastern tensions are raising questions about India’s earnings projections.
Eyes on US JOLTS job data
During Tuesday’s trading session, the focus will shift to the US JOLTS job data for April, set to be released at 14:00 GMT. This data could provide insightful information regarding job demand, which may impact the Federal Reserve’s monetary policy outlook.
It’s anticipated that the data will indicate US employers announcing around 6.82 million new hires, which is close to the 6.866 million reported in March.
Technical Analysis: USD/INR faces resistance above 20-day EMA
The USD/INR currency pair has been relatively stable around 95.00 and is slightly below the 20-day exponential moving average (EMA) of 95.38, signaling a slightly bearish trend in the near term. The pair has also retreated from recent peaks, and its failure to regain the short-term EMA suggests limited upward potential. Meanwhile, the Relative Strength Index (14) sitting around 49.5 indicates a balanced market condition rather than drenched in momentum or strong directional pressure.
On the upside, recent resistance is near the 20-day EMA at 95.39, and a daily close above this level would be necessary to alleviate the current downward bias, potentially paving the way towards the May 28 high of 95.67. Conversely, if it falls below the May 29 low of 94.46, it might dip toward 94.00.
