USD/INR: Indian rupee recovers, but not out of the woods yet

• USD/INR faces rejection once again near 72.12.
• The bulls gather pace for a fresh leg to the upside.
• Oil-price surge amid US-Iran escalation weighs on INR.

USD/INR gapped higher for the third day in a row this Wednesday, as the rally in oil prices escalating US-Iran geopolitical tensions continued to undermine the sentiment around the Indian rupee.

Thereafter, the spot advances further and retested two-month highs at 72.125. The 72.12 - key resistance of the weekly chart contracting triangle continued to emerge as a tough nut to crack and knocked-off the rates to 71.90 region, where it now wavers.

The INR bulls look to close in the bearish opening gap, as the black gold reverses a major part of its rally to 8.5-month highs. Oil rallied hard after news hit the wires that Iran fired missiles on the US airbases in Iraq, in an attempt to retaliate against the major US escalation.

Meanwhile, the downward revision to India’s GDP growth forecast to 5% by the Indian government also added to the bearish pressure seen around the domestic currency.

However, with US President Trump’s restrained response and Iran’s Foreign Minister Zarif hoping for de-escalation, markets calmed down slightly, prompting oil to give back gains.

Despite the latest leg up in the rupee, the risk remains to the downside ahead of Trump’s address to the nation and US ADP employment data due on the cards later on Wednesday.

Markets continue to fret over the negative impact of rising oil prices on India’s Balance of Payments (BoP), with the country already running into heavy current account deficit.

USD/INR Technical levels to consider