USD/INR is experiencing strong tailwinds from the strengthening US dollar. The RBI interventions are keeping the US dollar to Indian rupee exchange rate somewhat stable, but the macroeconomic factors remain in favor of the greenback.
On Friday, the Indian rupee showed strength against the US dollar. The USDINR pair slid 0.17% in its second consecutive red day. Despite the weakness in the last two trading sessions of the week, the pair closed the week with 0.38% gains.
The dollar strength (DXY) index is on the rise once again as the bond yield is experiencing an uptick. Since the start of September 2023, the DXY index has risen 1.03%. This has resulted in a weakness in the Indian rupee, which is trading close to its all-time lows against the greenback.
Another factor acting as a tailwind for USD/INR is the recent surge in oil prices. The crude oil price has surged to its fresh yearly highs. A positive sign is an increase in the Indian forex reserves this week after two weeks of downtrend. The strength shown by the rupee on Friday can be attributed to the support from the Reserve Bank of India (RBI).
Keeping the RBI interventions aside, the USDINR pair is looking very bullish. The pair has broken out of the symmetrical wedge pattern as visible on the following chart. If it weren’t for the RBI’s timely support, the forex pair could have been already trading at the 84.4 level, which is the technical target of the breakout.
The USD/INR forecast will be heavily dependent on the upcoming FOMC meeting in the US, where analysts are expecting the Fed to keep rates constant. A surprise 25 bps rate hike may cause an immediate surge in DXY, impacting foreign currencies like rupee.
In the meantime, I’ll keep sharing the updated USDINR forecast and my personal trades on Twitter, where you are welcome to follow me.
This post was last modified on %s = human-readable time difference 15:25