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USD/INR Rebounds Amid Unexpected DXY Index Bounce

The bounce in USD/INR pair has become even stronger after the rise in DXY Index. Indian Rupee has weakened in terms of US Dollar this week. Since the start of the week, US Dollar to Indian Rupee exchange rate has risen 0.43%. Our analysis reveals that the pair may keep trading sideways in the coming days.

On Thursday, USD/INR showed a positive price action, and the pair was trading 0.20% higher during its London session. Nevertheless, the pair remains 1.2% down from its yearly highs. In this article, we discuss the factors likely to affect Indian Rupee in the coming weeks and months.

Indian Rupee Reacts To US Inflation Data

The latest CPI data has shown that the YoY inflation in the US increased slower than expected in April 2023. This has strengthened the analyst expectations of a pause in further rate hikes during the June FOMC meeting. Nevertheless, the markets reacted differently on Thursday as the DXY index had an unexpected surge.

The rise in the dollar strength index appears to be a technical bounce. This is because the index had been consolidating around its 101 points support for the past few weeks. The bounce in DXY has also resulted in a 0.20% rise in USD/INR pair.

USD/INR Likely To Remain Sideways

Considering the latest inflation data and the state of the global markets, I expect US Dollar to Indian Rupee exchange rate to remain sideways in the coming days. On a daily timeframe, the pair appears to have strong support at the 81.60 level.

A breakdown below this support level will make USD/INR forecast bearish. In such a case, the pair may target its yearly lows of 88.89, which were made in January 2023. A lot depends on the next month’s FOMC meeting and the corresponding decision

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USD/INR chart
US Dollar To Indian Rupee Chart