The USD/INR exchange rate has remained in a consolidation phase in the past few months as investors watch the actions of the Federal Reserve and the Reserve Bank of India (RBI). The pair was trading at 82.88 on Friday, about 0.80% from its highest point in 2023.
Fed and RBI rate decisionsThe USD/INR pair was a stuck in a range as investors reflected on the latest minutes by the Federal Reserve and the Reserve Bank of India.
Minutes by the Fed revealed that most officials were concerned about the current inflation rate. As a result, these officials believe that rate cuts will not happen soon.
This view was confirmed by Patrick Harker, the head of the Philadelphia Fed. In a statement, he said that he believed that rate cuts can wait for a while.
Some analysts believe that the Fed should not be in a hurry to cut rates since inflation remains stubbornly high and that the economy was still doing well.
As such, it can wait for a while longer even if it means dragging the economy to a recession. Most analysts expect that the first rate cut will happen in June.
The other important USD/INR news was minutes by the Reserve Bank of India. These minutes revealed that the bank was also still concerned about inflation in its latest meeting.
In that meeting, the bank decided to leave interest rates unchanged at 6.5% where they have been in the past few months.
Recent economic numbers revealed that inflation was moderating. Core inflation dropped to its lowest level since 2019.
Looking ahead, the next important USD to INR will be the upcoming Indian GDP data. Economists expect the data to show that the country’s economy expanded by 7.2% in 2023 after growing by 7.6% in the previous year. In a note, analysts at ING said:
“Forward-looking indicators – together with another supportive Union budget for the coming calendar year – should maintain growth close to current levels in 2024.”
USD/INR technical analysis
The daily chart shows that the USD/INR exchange rate has drifted downwards in the past few weeks. It has formed a rounded top pattern, which is a sign of a reversal.
The 50-day and 100-day Exponential Moving Averages (EMA) have formed a bearish crossover pattern.
Most importantly, the pair has moved to the ascending trendline, which connects the lowest swings since November 2022.
Therefore, the outlook for the pair is mildly bearish, with the next point to watch being at 82.50. The alternative scenario is where the pair bounces back and retests last year’s high of 83.42.
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