📊 WEEKLY NEWSLETTER : - USDINR – OVERVIEW - WEEKLY PROJECTION - 16TH TO 20TH FEB'26!!

Previous Week OHLC:  90.55 / 90.79 / 90.3675 / 90.65 Weekly Change: -0.11% (Narrow range, consolidation bias)

THE USDINR

The USD/INR exchange rate will continue to be influenced by the U.S.–India interest rate differential and expectations surrounding Federal Reserve policy. Elevated U.S. real yields provide structural support for the dollar, limiting the potential for INR appreciation unless those yields decline. On the domestic front, the Reserve Bank of India is unlikely to reduce key policy rates in the near term, despite earlier market anticipation of easing. Recent inflation trends and policy adjustments have weakened the case for formal rate cuts, thereby sustaining higher real rate support for the INR. This dynamic helps temper downside risks for the currency, even as external factors keep the dollar strong.

Candlestick & Technical Structure: - Weekly Candle Insight

The latest candle formation shows a small real body with both upper and lower shadows, creating a structure that resembles a Spinning Top or indecision candle. This pattern reflects a balance between buyers and sellers, signaling uncertainty in near-term direction. It highlights supply pressure emerging near the 90.80 level and demand support around 90.35, suggesting that price action is consolidating within this range. Market is in range compression phase — volatility contraction typically precedes directional breakout.

Technical Indicator Dashboard

Moving Averages	RSI (14)	MACD	Bollinger Bands
Price hovering near short-term 10W EMA	RSI near 52–55 zone	Histogram flattening	Bands contracting
20W EMA slightly below → medium-term support intact	Neutral momentum, no verbought/oversold condition	Momentum divergence not visible yet	Expect volatility expansion soon (breakout pending)
Long-term structure still mildly upward biased	Momentum waiting for trigger	Suggests continuation of consolidation

RBI & Liquidity Watch

Spot defense was visible near the 90.75–90.80 zone, though the Reserve Bank of India appeared more focused on smoothing volatility rather than defending a specific level. Forward book positioning suggests there has been no aggressive intervention, reinforcing the view that the central bank’s actions are aimed at maintaining orderly market conditions. Meanwhile, domestic liquidity remains comfortable, supporting stability in the broader financial environment

Global Macro Alignment

On the U.S. side, the Dollar Index is consolidating while the 10-year Treasury yield remains stable but elevated, with rate-cut expectations only partially priced in. Against this backdrop, geopolitical tensions in key energy corridors persist, though crude price stability has provided some support to the INR. However, any risk-off spike could temporarily weaken the currency. Overall, INR continues to show strong correlation with the U.S. Dollar Index (DXY), U.S. 10-year yields, Brent crude prices, and foreign portfolio investor (FPI) equity flows, making these factors critical drivers of its near-term trajectory.

Regression & Correlation Model View

The short-term regression model highlights that USD/INR remains most sensitive to U.S. yields and the Dollar Index, while crude oil exerts only a moderate influence as long as prices stay below shock thresholds. Equity flows, however, show a strong correlation on a weekly basis, reinforcing their importance in near-term currency dynamics. For the coming week, the model bias is neutral to slightly tilted to the upside, with a potential test of 90.90. A meaningful breakdown would only be signaled if the pair sustains a close below 90.30.

Key Levels for Upcoming Week

Zone	Interpretation
90.30	Structural Support
90.20	Breakout downside trigger
90.80	Supply Zone
90.95	Breakout upside trigger
91.20	Momentum Extension

 Trade Strategy (Corporate & Trading View)

For Importers	For Exporters	Short-Term Traders
Hedge 50–60% near 90.40–90.50	Hedge near 90.85–91.00	Range trade 90.35–90.85
Add aggressively on break above 90.95	Avoid full hedge below 90.40	Breakout trade above 90.95 with SL 90.70
Use layered forwards	Consider options strategy (Put spread)	Breakdown trade below 90.20 with SL 90.45

Risk-reward currently favors breakout play.

Weekly Outlook Conclusion

USD/INR is currently in a volatility squeeze phase, with a directional breakout likely in the upcoming sessions. In the absence of strong foreign portfolio inflows or a sharp correction in crude prices, the bias leans toward marginal upside pressure.

Expected Range: 90.30 – 91.20

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Disclaimer – FXMethods

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