The Indian rupee is giving back the advances it made last week as the currency reconnects with underlying fundamentals, according to an analysis published by Investinglive. The Reserve Bank of India (RBI) appeared to have intervened on three occasions, producing sharp rupee spikes despite climbing oil prices and a relatively stable US dollar — conditions that typically weigh on the Indian currency. Those intervention-driven moves are now fading, the report notes, because such gains rarely last without a shift in fundamentals.

Dollar: NFP Pop Fades as Focus Turns to CPI

The US dollar spiked higher on Friday after a strong US Non-Farm Payrolls (NFP) report, but the gains did not hold, with most of the NFP-driven moves fading afterward. The analysis attributes this to a shift in market attention: traders were focused not on the jobs report but on the upcoming Consumer Price Index (CPI) release, as the market tends to watch the data the central bank cares about — and the Federal Reserve is currently focused on inflation.

One day before the NFP report, the Fed's Waller said he would support keeping interest rates unchanged at the upcoming FOMC meeting, but that a hot CPI print would lead him to consider a rate hike. That framing explains why traders are centered on Friday's CPI report.

Unless there is a surprising breakthrough in US-Iran relations, price action will likely remain mostly rangebound or slightly positive for the greenback, as traders may begin hedging ahead of the CPI release. A soft or in-line CPI would likely weaken the dollar, given Waller's stated position that he will not consider a rate hike without a hot CPI reading. Conversely, an upside surprise in core monthly inflation would likely spark another dollar rally on a hawkish repricing of Fed policy expectations.

Rupee: Intervention Gains Prove Fleeting

Over the past week, the rupee was "completely detached from reality," rallying despite another rise in oil prices and a broadly stable US dollar. The report links this to a series of RBI interventions, noting three strong spikes without any positive catalyst for the currency.

This week, those rupee gains are being unwound. Oil prices have been rising steadily and US CPI risk looms on the horizon — both negative drivers for the rupee.

In the short term, the INR will continue to be driven by oil prices and the hawkish or dovish repricing of Fed rate expectations. As a result, the pair could remain within its wide range until the US and Iran reach an agreement and the Strait of Hormuz is reopened. In the bigger picture, the Indian rupee remains in a bearish structural trend against the US dollar, and dip-buyers will continue to seek opportunities around strong major technical levels to push the USD/INR pair into new highs.

USD/INR Technical Analysis — Daily Timeframe

On the daily chart, USDINR has erased most of the RBI intervention-driven moves and is approaching the major downward trendline. The analysis expects sellers to lean on the trendline with risk defined above it, positioning for a drop toward the 94.00 handle. Buyers, by contrast, would want to see the price break higher to add to bullish bets toward the 96.10 resistance.

USD/INR Technical Analysis — 4-Hour Timeframe

On the 4-hour chart, an upward trendline is defining bullish momentum. A pullback into the trendline could see buyers step in with risk below it to keep pushing toward new highs, while sellers would look for a break lower to extend bearish bets toward the 94.00 handle.

USD/INR Technical Analysis — 1-Hour Timeframe

On the 1-hour chart, a minor upward trendline is defining bullish momentum on this timeframe. Buyers will likely continue to lean on the trendline with risk below it to push toward new highs, while sellers will look for a break to extend the drop toward the 4-hour trendline.

Upcoming Catalysts

Tomorrow brings the US PPI report and US Jobless Claims figures, and the week closes on Friday with the US CPI report. US-Iran developments will also remain key for the Indian rupee, which continues to be driven mainly by oil prices.