USDINR Consolidates Ahead of RBI Interest Rates and U.S. Data

Summary:

The USDINR pair has been consolidating in a tight range over the last month but a delayed RBI interest rate decision should be coming soon.

The USDINR pair has been consolidating in a tight range over the last month but a delayed RBI interest rate decision should be coming soon, alongside some key data on the U.S. economy this week.

Analysts expect the bank to keep Indian rates unchanged at 4% but they will provide economic guidance for the first time since February. The bank has been criticized over a delay to the MPC meeting after the bank failed to confirm new appointments to the committee, despite having three months to do so. This has created uncertainty in the market and is likely one of the main reasons why the market has been unable to see any big volatility in the last month as traders are wary of making big bets on the pair.

The RBI won’t have an easy task ahead after the economy dropped -23.9% in the second quarter with an unemployment rate at 11%, whilst inflation is running at 6%. The bank cut interest rates from 5.2% in October last year to the current rate and they may be hesitant of lifting them after the recent drop to 4%.

In the U.S we will have a busy calendar this week with final GDP on Wednesday, followed by inflation and manufacturing numbers on Thursday. Friday closes with the latest payroll numbers. Other events ahead for the U.S. are the first Presidential debate this evening, whilst there are also renewed talks about the latest stimulus package.

USDINR Technical Outlook

The USDINR pair is consolidating at the 50-week moving average after a 2020 sell-off. The pair had risen from around 71.00 in January to a high near 77.00 in mid-April. The price is now at 73.70 but there is a risk of further losses after the pair failed to gain despite a strong U.S. dollar rally in September. The pair is trading within a wedge formation and a test of the support line is possible, where a close near 72.00 could see a more pronounced pullback. The ATFX Q4 2020 Outlook is now available to download. Please find it here.