Sharp oil price correction supports further Indian Rupee gains

• A sharp fall in oil prices helps the Indian Rupee build on its gains against the US Dollar.
• A diplomatic settlement with Iran remains the US preference rather than a resumption of military action.
• US midterm elections become the focus for investors.

A 0.23% decline takes USD/INR to around 94.72 in Monday’s opening trade, as a sharp pullback in oil prices supports the Indian Rupee (INR). The currency is extending the previous trading day’s advance against the US Dollar (USD).

Almost 4% lower at around Rs. 9,545 as the week begins, the MCX Crude Oil contract expiring on 19 November has retreated sharply. Friday had seen the contract reach a multi-month high of Rs. 9,972.

For currencies of economies such as India, where imported oil meets a large share of energy requirements, a correction in oil prices is supportive.

Diplomatic Hopes Drive Sharp Oil Price Correction

Renewed optimism over a diplomatic settlement between the United States (US) and Iran has prompted a sharply lower opening for oil prices.

Speaking over the weekend, US Secretary of State Marco Rubio said President Donald Trump favours a diplomatic resolution and that Washington had taken no decision to resume strikes on Tehran. He nevertheless cautioned that the US still has the capabilities to accomplish whatever military objective Trump chooses to pursue.

Concerns about prolonged risks to energy supplies have eased following the US signal that it is prepared to pursue peace, rather than the joint military action with Israel after the midterm elections that it had previously indicated.

Further reassurance has come from Iran’s comments that it can reopen the Strait of Hormuz. The waterway is a crucial route for almost 20% of global energy supply, and the remarks have reduced concerns about supply risks.

According to Al Jazeera, Iran’s Foreign Minister Abbas Araghchi said discussions with Qatari mediators are continuing over a plan to reopen the Strait of Hormuz within two days, provided the US cooperates.

US Midterm Elections Set to Drive US Dollar Moves

Tuesday’s US midterm elections are set to be this week’s principal catalyst for the US Dollar, as well as for global markets.

Political risk surrounding the forthcoming US midterm elections has become the Dollar’s leading near-term driver, according to analysts at ING. With positioning exposed to changes in the political landscape, they highlight that “the main risk for the dollar today is some precautionary unwinding of net-long positions ahead of Tuesday’s US midterm elections,”.

According to ING, “a Democratic sweep is trading around 68% in prediction markets,” an outcome the bank warns “could be seen as slightly negative for the US dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.” The bank therefore advises against excessive optimism towards the greenback over the very short term, concluding: “We’d be cautious in chasing the USD upside in the next few days.”

USD/INR Remains Under Pressure Below 20-Day EMA

Trading below the 20-day Exponential Moving Average (EMA) at 95.23 leaves USD/INR with a bearish near-term bias. The pair slips towards 94.70 on Monday.

Immediate overhead supply from this short-term EMA continues to weigh on the pair. Meanwhile, a Relative Strength Index (14) reading of around 40 points to subdued momentum rather than extreme oversold conditions, suggesting the risk of further declines.

A decisive break above initial resistance at the 20-day EMA, near 95.23, would be needed to temper the prevailing bearish bias and pave the way for a wider recovery. Should the pair fall further, September’s low of 94.28 would provide a key demand zone.

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