• The Indian Rupee rebounds against the US Dollar as hawkish Fed bets ease.
• US headline and core CPI growth cooled faster than expected in June.
• Oil price rally halts while US-Iran military aggression continues.

The Indian Rupee (INR) gains ground against the US Dollar (USD) on Wednesday after rising significantly in the last three trading days. The USD/INR pair drops to near 96.11 as the US Dollar comes under selling pressure, with traders repricing Federal Reserve (Fed) interest rate expectations following the release of the softer-than-expected United States (US) Consumer Price Index (CPI) data for June.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% lower to near 100.80.

Hawkish Fed bets

On Tuesday, the US CPI report for June showed that the headline inflation cooled down at a faster-than-expected pace to 3.5% Year-on-Year (YoY) from 4.2% in May. In the same period, the core CPI – which excludes volatile food and energy items – grew at a moderate pace of 2.6% YoY against 2.8% estimates and the previous reading of 2.9%.

Signs of decelerating price pressures have eased fears of Federal Reserve (Fed) interest rate hikes in the near term.

According to the CME FedWatch tool, the odds of the Fed raising interest rates at the policy meeting this month have eased to 16.6% from 41.7% recorded on Monday.

Meanwhile, Fed Chairman Kevin Warsh has reiterated the need to bring price stability in his testimony before Congress on Tuesday. Warsh said in his prepared remarks, “The Fed has no tolerance for persistently elevated inflation.” "If we get policy right - and we will- the inflation surge of the last five years will be a thing of the past," Warsh added.

Oil price rally hits pause

Over-a-week-long rally in oil prices appears to have paused for a while as US President Donald Trump has rolled back the idea of charging a 20% toll fee from cargo ships transiting through the Strait of Hormuz, a vital passage to almost 20% of global energy supply.

However, the continued aggression between the US and Iran will keep the energy supply disrupted, a scenario that is favorable for the oil price.

FIIs dump Indian shares again

Foreign Institutional Investors (FIIs) turned out to be net sellers in the Indian stock market for the second consecutive trading day on Tuesday, paring their stake worth Rs. 739.69 crore. FIIs also sold shares worth Rs. 3,062.27 crore.

Technical Analysis: USD/INR holds firmly above 20-day EMA

USD/INR trades subduedly at around 96.15 at press time. However, the near-term bias of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which is at 95.37.

The positive slope of the EMA hints at a constructive underlying trend, while the Relative Strength Index (RSI) at 62.1 stays in bullish territory without yet reaching overbought, suggesting buyers still have room to press the move higher.

On the downside, immediate support is seen at the 20-day EMA at 95.37, where dip-buying interest could emerge if a corrective pullback unfolds. Looking up, the pair aims to revisit the all-time high at 97.10.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.