1. FX Outlook
  2. FX Options Weekly

Macro and Vol Commentary

USDINR pair has been edging higher in recent months, but resistance at 82.90 held firm, following a round of positive economic and fiscal releases, strengthening the rupee.

Indian Economy and Inflationary Risks

  • India’s growth decelerated in Q4’22, growing by 4.4%, marking the slowest quarterly performance since Q1’22 as a higher interest rate environment weighed on the consumer sector.
    • In particular, the consumer sector growth slowed to 7.6% y/y in Q4’22 after a growth 9.2% in the previous quarter.
  • Purchasing managers’ index pointed to a divergence in different segments of the economy.
    • Services expanded from 57.2 to 59.4 in February, a 12-year high, on the back of easing price pressures.
      • We expect the service industry to remain expansionary in the coming months, but with hiring still slow and confidence below the longer-term trend, the outlook for the sector is muted.
    • Meanwhile, manufacturing deteriorated slightly to 55.3 from 55.4.
  • Inflation story differs slightly from what we have seen in more developed nations.
    • The index eased to 6.44% from 6.52%, helped by the fall in food prices.
      • The recent months’ decline in the rate of inflation was broad-based primarily on the fall in prices of crude, energy prices, non-food and food articles.
    • Core inflation remained above the target of 6.0% in the last 15 months, and we expect the decline in non-volatile components to be less robust, providing support for inflation stickiness.
    • At the same time, India’s farm sector has become under threat of a heat wave, clouding the outlook for policymakers already dealing with sticky inflation.
      • Current warm temperatures and the prediction of a hotter summer compounded the concerns, which could drive the shortage of agricultural products, adding to inflationary worries.
      • As a result, electricity prices jumped to near-record levels, triggering concerns about another squeeze on the power supply and the government has now advised farmers to check their crops for signs of heat stress. .
        • Peak demand for electricity touched 211GW in January, close to an all-time high last summer.
    • We expect the economy to remain reliant on energy imports, especially from Russia, with crude imports averaging at 1m barrels since the start of the year.
  • The Reserve Bank of India has increased interest rates by 250bps since May to slow inflation and signalled that it is not ready to pause just yet.
    • Even with inflation softening slightly month-on-month, the overall level remains above the government target of 6.00%
    • We expect another 25bps hike in April, even as the markets lowered their expectations for the Fed to hike rates next week amid the SVB crisis.
    • The focus is to remain on calming inflation; however, other tools might come into play to achieve a sustainable level of price growth.
  • In the longer term, recently announced government aid should provide support for the economy’s performance.
    • Given the recent scaleback of free food programmes and a cut in fertiliser prices, the government shift is now turned to developing the manufacturing sector.
    • Modi’s team announced a pro-growth budget plan with cuts in personal income taxes and INR10tr allocated to public infrastructure.
      • This should lessen the burden on the middle class and encourage capital investment to stimulate growth.
      • We do not expect this to be inflationary, given the shift from cash handouts to subsidies boosting infrastructure creation.
        • Indeed, the budget deficit has been reduced to 5.9% of GDP for fiscal 2024, down from 6.4% in 2023, alleviating some of the fiscal burdens.

Compounding inflationary issues seen across India set the path for further policy tightening from the central bank, and we expect another rate hike of 25bps from the RBI in April to solidify INR strength on the day of the announcement. However, the dollar is to remain firm (1-month) and the Indian economy is showing cracks in consumer and export sectors, weighing on the currency to retest the 83.00 resistance level, but in the longer term (6 months), marginal upside trend is to prevail. In the meantime, with uncertainty surrounding the hike from the Fed next week, we expect dollar volatility to drive the trend.

Sources: S&P Global, Reserve Bank of India Controller General of Accounts, Central Statistics Office India  

Volatility Commentary

One month Volatility has consistently been realising lower since October 2022. We believe this is likely to continue despite recent global market jitters which have affected EM Ccy’s across the board. Fundamentally, our view on USDINR is neutral improving budget deficit and monetary tightening, but current account deficit is a key challenge for INR.

Current ATM Implied vol have risen this week and are at 5.5%, we believe the right play would selling vol picking up premiums. Technically, USDINR has been trading in a range and has formed an ascending triangle pattern; Indicating any breakout is likely to be on upside, so limiting losses on upside would be prudent.

USDINR Trade Idea

  • Sell a strangle coupled with a purchase of a call to limit losses if markets breaks up
  • Sell 5m USDINR PUT strike 82.5
  • Sell 5m USDINR CALL strike 83
  • Buy 5m USDINR CALL strike 84


  • Expiry 1m: 16/06/2023
  • 1m FWD PX ref: 82.99
  • You rec Approx 36k USD for this structure.

Positioning Charts

USDBRL NDO Positioning Data 02/03/2023 - 09/03/2023

USDBRL appetite continued to diminish in the week ending March 16th, with a few large put options expiring today. We saw positions being shifted down the curve, with the range widening to 5.10-5.50 in March and April. At the same time, the upside cover shrunk slightly, with some futures expiring above 5.70 being taken off the table. We expect some downside momentum build today, with some puts taking place just under 5.10, but the longer-term outlook suggests the pair to remain range-bound between 5.00-5.50. 

Usd Brl 2 9 (3)

USDBRL NDO Positioning Data 09/03/2023 - 16/03/2023

Usd Brl 9 16 (3)

USDCNY Vanilla Positioning Data 02/03/2023 - 09/03/2023

USDCNY appetite increase slightly in the week ending March 16th, with most of the new positions expiring closer to the outlier figures. At the same time, the near-term range also widened, suggesting uncertainty for the price direction but also expectations of incoming volatility. Puts for March expiry are now trading between 6.75-6.95. The range gets the widest in mid-April, both covered extend out of the 6.70-7.10 range. While the number of calls is greater than of puts, the latter is bigger in notional side, suggesting greater conviction for some downside in the near term. 

Usd Cny 2 9 (3)

USDCNY Vanilla Positioning Data 09/03/2023 - 16/03/2023

Usd Cny 9 16 (3)

USDINR Vanilla Positioning Data 16/01/2023 -16/02/2023

USDINR positioning range tightened in the month ending March 16th, down to 81-83, pointing to markets taking comfort in prices being at current levels. At the same time, the notional size of puts increased for the expiry taking place April, and we might see some downside momentum build then. After a build up of downside cover at 83.5 in the month ending February 16th, investors added a similar strategy for the calls with a strike of 86. Still, the near-term points to strong marginal conviction on the downside, and we expect the pair to weaken, while remaining within the longer-term range. 

Usd Inr Jan Feb

USDINR Vanilla Positioning Data 16/02/2023 - 16/03/2023

Usd Inr Feb March

Charts and Tables

FX Expiries

Expiry (40)

Historical Spot FX Volatility (30D Rolling)

Chart (34)

FX Matrix (today)

Spot (92)

Weekly Change

Week (73)

Key Events & Releases

Calendar (105)

Technical Charts

JP Morgan Global FX Volatility 


The index rallied sharply in recent days after rejecting resistance at 11.00 to test the 11.71 level. This resistance held firm, and the index is now settling back at 11.00. The stochastics are continuing to fall, and momentum is seen on the downside in the near term. The %K/%D is falling into oversold, and the MACD diff is negative and diverging sharply, given today’s move. The moving average levels are now providing robust support levels on the downside once again, and the index would first need to break below these levels before testing 10.17. Alternatively, appetite back above current levels could set the scene for 11.50 and recent highs of 11.71. We expect some downside in the near term, but for the index to struggle below the moving average levels.

Dollar Index 


The index softened in recent days after a positive run at the start of this week, pushing the index back to test the trend support at 104. At the same time, the shorter-term moving averages at 104.60 are capping upside momentum. The stochastics are falling, highlighting continued trends on the downside, but the levels are close to the oversold territory, which could mean the bearish trend is slowing. The MACD diff is positive and converging. To confirm the acceleration of the downside trend, the index needs to break below the support of 200 MA at 103.95 before testing 103 once again. Alternatively, if the index was to break above the shorter-term moving averages, we could see levels retest at 105 and then 105.35 once again. The indicators point to a slowdown of downside momentum in the near term, and we expect to remain supported by the 200 MA and the trend support in the near term.



The pair has weakened in recent days after testing the resistance at 82.91 and has edged slightly lower since then to trade at 82.51. Still, the pair remains range-bound, supported by the longer-term levels of 81.67 and 82.91 on the downside and upside, respectively. Today’s candles pointed to downside momentum struggling to break below 82.50, but the indicators suggest that strong downside pressures are on the horizon. The stochastics have converged on the downside in overbought, a strong sell signal, and the MACD diff is positive and converging, further highlighting the growing downside impetus. The next robust level on the downside is at the moving average levels at 82.20, and if the pair breaks below these levels, we could see future losses to 82.00. On the upside, if the 50 MA at 82.52 is broken, this could suggest further impetus to 82.90. We expect USDINE to weaken slightly but remain within the longer-term ranges.



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