USD/INR Forecast Ahead of the Fed and RBI Rate Decisions

Summary:
• The USD/INR price continued its consolidation phase as investors waited for the upcoming Fed interest rate decision. What next?

The USD/INR price continued its consolidation phase as investors waited for the upcoming Fed interest rate decision. It was trading at 82.35, where it has been in the past few days. This price is slightly below this month’s high of 83.17. So, is the Indian rupee a good buy ahead of the RBI’s off-cycle meeting?

Fed and RBI interest rate decision ahead

The USD to INR exchange rate will be in the spotlight as investors focus on the upcoming Fed and RBI decisions. Most analysts expect that the Federal Reserve will hike interest rates by 0.75% again, bringing the year-to-date rate to 375 basis points. The key catalyst for the US dollar will be signs of pivoting by the Federal Reserve. Signs of a Fed pivot will lead to more sell-off of the US dollar.

Meanwhile, the Reserve Bank of India will hold an off-cycle meeting this week to deliberate on the state of the economy. The bank’s officials believe that the next official meeting scheduled for December 5-7 is still too far. 

In this week’s meeting, the bank, which is led by Shaktikanta Das, will talk about inflation and possibly continue hiking rates. Also, the bank will write a letter to the government explaining why inflation has risen above the 2-6% range in the past three straight quarters. Inflation stands above 6%, which is the highest it has been in eight years. This figure is much better than that of most countries, including the US and UK. In a statement, an analyst at Trust Mutual said:

“Coming immediately after the Fed meeting, it also enables the RBI to not wait for a whole month after the Fed decision in case there is a steep hike of 100 basis points.”

USD/INR forecast

The four-hour chart shows that the USD to INR price has been in a consolidating phase recently. It remains slightly above the ascending trendline shown in green. This trendline connects the lowest levels since September 30th. It has moved to the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved to the neutral point of 50.

Therefore, the USD/INR price will likely keep rising as bulls target the next key resistance level at 83. A drop below the support level at 82 will invalidate the bullish view.