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  • USD/INR extends Friday’s rally on oil rally amid Mid-East tensions.
  • The bulls consolidate before the next push higher.
  • Eyes on US-Iran geopolitical updates and US Services PMI.

USD/INR has entered a phase of bullish consolidation on the 72 handle after reaching the highest levels in two months at 72.125.

The extensive rally stalled at 72.12 – the key resistance of the weekly chart contracting triangle, as the bulls catch a breath heading into the European session while awaiting any military response from Iran.

Both the US and Iran traded threats over the weekend, as Iran now gears up for retaliation against the US killing of the key Iran military personnels, including the Quds Force Commander, Soleimani last Friday. Meanwhile, US President Trump also said that the US is prepared to launch attacks should Iran target Americans or American assets.

Moreover, the US-Iran tensions seem to spill over to Iraq, denting the US-Iraq relationship. This emerged as the main reason for the latest leg higher in oil prices. WTI reached the highest levels in eight months above $64. The ongoing upsurge in the black gold continues to weigh negatively on the Indian rupee.

Markets remain wary 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. Therefore, the price has witnessed two consecutive days of a bullish opening gap and the selling pressure on the rupee is unlikely to ease anytime soon.

Meanwhile, the US dollar trades broadly flat around 96.85 region amid falling Treasury yields, in the wake of risk-off market profile. Therefore, the USD dynamics seem to have little to no impact on the cross so far.

All eyes remain on the US-Iran tensions and US Markit Services PMI data for the next direction in the prices.

USD/INR Technical levels to consider