USD/INR Eyes Breakout as Dollar Rebounds and Tariff Risks Reemerge

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: January 5, 2026

Key Moments

The US dollar has recovered most of its Christmas week losses as markets price in 63 bps of Fed easing by year-end.
The Indian Rupee has given back about half of its post-RBI-intervention gains, with USD/INR approaching the 90.40 resistance zone.
The 90.40 level remains pivotal. A break above it could open the path to new record highs for USD/INR.

Fundamental Overview

US Dollar: Rebound After Holiday Weakness

The US dollar fell broadly during the Christmas week but has since recovered most losses. Market participants largely viewed holiday price moves as noise, and trading has returned toward prior ranges.

Macro conditions have not changed significantly in the last two weeks. Recent Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) data were softer than expected. Markets continue to factor in 63 bps of Fed rate cuts by year-end. December data were interpreted cautiously due to the shutdown, with upcoming releases expected to provide clarity.

Market pricing implies the Federal Reserve could start easing as early as March. Very weak data this month could accelerate an earlier move. Conversely, stronger data may reduce expectations for rate cuts, supporting the US dollar.

Indian Rupee: Post-Intervention Gains Fading

The Indian Rupee rallied after the RBI’s intervention on December 17. However, most gains have reversed as USD/INR approaches the key 90.40 zone. The broader trend still favors Rupee weakness.

Geopolitical risks are also resurfacing. Trump threatened additional tariffs on India if it does not cooperate on Russian oil. He wants India to halt Russian oil imports and push Moscow toward a peace deal with Ukraine.

USD/INR Technical Picture

Daily Chart: Bulls Regain Control

On the daily chart, USD/INR fell to the lower boundary of its rising channel after the RBI intervention. Buying interest picked up near this support. Once price moved above 89.70, bullish positions increased toward the 90.40 resistance.

A decisive break above 90.40 could pave the way for fresh record highs.

4-Hour Chart: 90.40 as a Strategic Pivot

The 4-hour chart shows a firm resistance zone at 90.40. Sellers may defend this level, aiming for a move back to 89.60. Buyers, however, could wait for a clean breakout above 90.40 to add long positions, targeting new highs.

1-Hour Chart: Short-Term Battle at Resistance

The 1-hour chart mirrors the broader structure. Sellers are likely to re-enter near 90.40, seeking short-term dips. Buyers will watch for a breakout to position for another leg higher.

Key Technical Levels

Level	Role
90.40	Major resistance and pivot for potential new record highs
89.70	Previously broken resistance, now a reference support zone
89.60	Downside target for sellers from 4-hour resistance
Lower rising channel boundary	Daily trendline support where dip-buying recently emerged