USD/INR faces pressure in countdown to Trump’s Iran deadline

The Indian Rupee trades marginally higher against the US Dollar ahead of Trump's Iran deadline.
Investors await Iran’s final decision on Trump’s deadline at 08:00 PM ET, 05:30 AM IST on Wednesday.
The RBI is expected to maintain the status quo on Wednesday.

Sagar Dua FXStreet

The Indian Rupee (INR) ticks up against the US Dollar (USD) on Tuesday, with the USD/INR pair edging down to near 93.00. The pair is expected to remain range-bound as investors stay on the sidelines ahead of United States (US) President Donald Trump’s ultimatum to Iran either to reopen the Strait of Hormuz or face brutal consequences, whose deadline is Tuesday, April 7, 08:00 PM Eastern Time (ET), which will be 05:30 AM IST on Wednesday.

Investors await Trump's Iran deadline

Over the weekend, US President Trump warned, through a post on Truth.Social, that Washington will bomb Iranian power plants and bridges, if it doesn’t reopen the Strait of Hormuz before the deadline.

Meanwhile, comments from Iran signal that it won’t back down, as it threatened reciprocal attacks on the regional US infrastructure and its allies. An advisor to Iran's Parliament Speaker Mohammad Bagher Ghalibaf stated that “Trump has about 20 hours to either surrender to Iran, or his allies will return to the Paleolithic Age”.

Market participants worry that a fresh escalation in the ongoing war would boost oil prices, a scenario that is unfavorable for the Indian Rupee, being the currency of a nation that caters its 88%-89% of its domestic energy needs through oil imports.

The ongoing tensions in the Middle East have dampened the interest of foreign investors in the Indian stock market. Foreign Institutional Investors (FIIs) continue to dump their stake in the Indian equity market, and have offloaded their stake worth Rs. 26,429.45 crore in the three trading days of April gone by.

RBI’s policy decision and FOMC minutes will be released on Wednesday

On the domestic front, the next major trigger for the Indian Rupee will be the Reserve Bank of India’s (RBI) monetary policy announcement on Wednesday. The RBI is expected to leave its Repo Rate unchanged at 5.25%, as higher energy prices have prompted inflation expectations globally.

As the RBI is highly anticipated to maintain the status quo, investors will pay close attention to comments from the Indian central bank regarding the outlook of inflation, economic growth, and key borrowing rates.

In the US, the Federal Open Market Committee (FOMC) minutes of the March policy meeting will be published on late Wednesday. In the policy meeting, the Fed decided to leave interest rates unchanged in the range of 3.50%-3.75% and stated that “higher energy prices will push up inflation in the near term”.

Technical Analysis: USD/INR struggles to return above 20-day EMA

USD/INR edges down to near 93.00 in afternoon trading hours in India on Tuesday. The near-term bias appears neutral as the pair trades close to the 20-day Exponential Moving Average (EMA), which is at 92.95, capping rebounds. The overall trend remains bullish as the higher highs and higher lows structure has not broken yet.

The 14-day Relative Strength Index (RSI) shifts into the 40.00-60.00 zone from the bullish territory above 60.00, signifying that momentum has cooled down, but the bullish bias remains intact.

Initial support emerges at the March 9 high of 92.35, with a daily close below this level opening the room toward the March 5 low of 91.35. On the topside, immediate resistance stands at the April 2 high of 93.66; a break above that level would reassert the bullish trend, which will improve the odds of the price reclaiming the all-time high of 95.22.

Economic Indicator

RBI Interest Rate Decision (Repo Rate)

The RBI Interest Rate Decision is announced by the Reserve Bank of India. If the bank is hawkish about the inflationary outlook of the economy and rises the interest rates, it is seen as positive, or bullish, for the INR, while a dovish outlook for the economy (or a rate cut) is seen as negative, or bearish, for the currency.

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