USD/INR Poised for Breakout as Ascending Channel Remains in Control

Traders' Opinions

Summary:

The Indian rupee traded marginally lower at 91.15/USD, pressured by caution ahead of US-Iran nuclear talks in Geneva that could significantly impact oil prices.

BUY USDINR

EXP

PENDING

91.20000

Entry Price

93.50000

89.90000

91.01911 +0.03244 +0.04%

Pips

PENDING

89.90000

Exit Price

91.20000

Entry Price

93.50000

The Indian rupee edged modestly lower against the US dollar during domestic trading hours on Thursday, with the USD/INR pair drifting up to near the 91.15 handle. The mild depreciation comes as currency markets adopt a cautious posture, caught between the crosscurrents of potential geopolitical shifts in the Middle East and lingering ambiguity surrounding Washington’s aggressive trade policy recalibration.

The focal point for energy-sensitive currencies like the rupee is undeniably Geneva. Later today, US and Iranian officials are slated to resume discussions regarding Tehran’s nuclear program. Market participants are keenly attuned to any signs of détente; a breakthrough could pave the way for the lifting of sanctions on Iranian oil, potentially flooding a market already wrestling with supply concerns. Given that India is the world’s third-largest crude importer, financing over 80% of its oil needs through foreign purchases, any sustained decline in benchmark crude prices would provide immediate relief to the nation’s import bill and offer a tailwind for the rupee. Conversely, a breakdown in talks could exacerbate supply anxieties, pushing oil prices higher and adding fresh downward pressure on the local unit.

Offsetting some of the external bearishness is a discernible shift in domestic capital flows. After enduring a relentless selling spree for seven consecutive months, Foreign Institutional Investors (FIIs) have pivoted back to the Indian equity market with conviction. So far in February, overseas investors have pumped in a net Rs 4,361.57 crore ($500 million approximately). This resurgence of foreign capital is a critical pillar of support for the rupee, as sustained inflows are required to bridge the current account deficit.

The return of “hot money” appears intrinsically linked to the recent thaw in US-India trade relations. Earlier this month, the two nations formalized a significant trade pact that saw Washington slash average tariffs on Indian imports to 18% from a punitive 50%, the latter having included retaliatory measures for New Delhi’s continued procurement of Russian oil. This de-escalation in trade tensions has enhanced the risk-reward profile of Indian assets, enticing foreign investors back to the world’s fifth-largest economy.

Domestically, all eyes are on the release of India’s Q4 Gross Domestic Product (GDP) data, scheduled for later in the day. The consensus forecast points to annualized growth of 7.2%. While still robust by global standards, this would mark a notable deceleration from the blistering 8.2% expansion recorded in the third quarter of 2025. A print matching or falling below expectations could temper some of the recent bullish exuberance surrounding the Indian growth story.

On the global front, the US dollar is navigating a complex web of trade and monetary policy signals. The US Dollar Index (DXY) is treading water near 97.50 as traders digest contradictory signals from Washington. Overnight, US Trade Representative Jamieson Greer hinted at a potential escalation in protectionism, stating that tariffs on certain nations could be hiked to 15% or higher, up from the recently imposed baseline of 10%. Greer stopped short of naming specific countries, leaving markets to grapple with heightened uncertainty.

This ambiguity was compounded by a judicial setback for the White House. The Supreme Court recently invalidated the administration’s use of emergency economic powers to justify its reciprocal tariff agenda, accusing President Donald Trump of overreach. This legal wrangling has injected a dose of uncertainty into the dollar's outlook, capping its recent strength.

Amidst the trade noise, the outlook for US monetary policy remains relatively placid. According to the CME FedWatch tool, traders are overwhelmingly confident that the Federal Reserve will maintain the status quo, holding interest rates steady in the 3.50%-3.75% range through both the March and April policy meetings. This stable rate environment removes one variable of volatility for emerging market currencies, allowing the rupee’s trajectory to be dictated more acutely by oil price dynamics and the durability of the recent FII inflows.

Technical Analysis

On the daily chart, price action continues to respect a rising parallel channel that has guided the broader uptrend since mid-2025. The pair is currently consolidating in the upper half of this ascending channel near 91.13, following a sharp pullback from recent highs around the 92.00 region. While this corrective move briefly pressured the structure, it has not meaningfully damaged the broader bullish trend.

Price has recently rebounded from the lower boundary of a short-term rising channel nested within the broader ascending structure, indicating that buyers continue to defend dynamic support levels. The series of higher highs and higher lows remains intact, reinforcing the prevailing upside bias. The recent impulsive rally followed by a controlled retracement suggests a healthy bullish continuation pattern rather than distribution.

A decisive daily close below the lower boundary of the main ascending channel—currently converging near the 90.00–90.20 region—would represent a notable deterioration in market structure. Such a breakdown, particularly if accompanied by sustained trading below the 90.00 psychological threshold, could expose deeper support near 88.50–89.00, where prior consolidation and breakout activity occurred. A sustained move beneath that zone would open the door toward 87.00, marking a broader trend correction rather than a routine pullback within the uptrend.

On the upside, bullish traders are focused on a clean break above the recent swing high near 92.00–92.20, which aligns closely with the upper boundary of the broader ascending channel. A sustained push through this resistance zone would likely accelerate upside momentum and shift attention toward 93.50, followed by a potential extension toward the 94.00–95.00 region, representing the next projected channel resistance area.

Price structure currently suggests consolidation rather than exhaustion. The tight clustering of recent candles near the mid-to-upper channel range indicates compression before a directional move. The rejection wick from the recent spike lower shows responsive buying interest at dynamic support, reinforcing the bullish case as long as price remains within the channel.

Overall, the dominant trend remains upward, with consolidation unfolding within a structurally sound bullish framework.

TRADE RECOMMENDATION

BUY USD/INR

ENTRY PRICE: 91.20

STOP LOSS: 89.90

TAKE PROFIT: 93.50

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