USDINR Prediction: Dollar Resurgent As RBI Retains Interest Rate

Summary:
• USDINR stayed up early on Thursday despite the Reserve Bank of India's decision to retain interest rates at 6.5%.What's happening?

USDINR edged up on Thursday as the market ignored the Reserve Bank of India’s decision to retain interest rates. The currency pair rose by 0.1 percent to 83.95 at the time of writing, with the dollar’s safe haven status and stable US bond yields play a key part. Meanwhile, the rupee has support from oil prices which are trading near six-week lows. Furthermore, the impending Fed interest rate cuts have put a lid on the dollar’s gains.

The RBI retained India’s lending rate at 6.5 percent, meeting market expectations. The country’s economy has shown stability and is projected to grow by as much as 7 percent this year. Therefore, the current rates are expected to remain in place until the end of the year. On the other hand, the US economy has run into headwinds in recent months, and the market expects as many as three rate cuts beginning in September. Meanwhile, benchmark 10-year US treasury bonds have hovered around 3.9 percent this week, providing delicate support to the dollar. However, further drop by 10 basis points or more could raise the pressure against USDINR.

Momentum indicators

USDINR looks to continue the upside as per the indicators on the 4-hour chart. The pair is marginally above the middle Bollinger Band, and has made two attempts to cross below that level. This indicates that the upside momentum is weakening, and a move below the 83.90 psychological mark could strengthen the bears. Also, the Moving Average Convergence Divergence (MACD) indicator is below the signal line, aligning with the bearish-leaning view.

Support and resistance levels

The 30-minute chart on USDINR suggests control by the buyers, as per the RSI indicator. The upside will likely continue if the buyers keep the price above the 83.90 mark. With that momentum, the first resistance could come at 83.97, but extended control by the buyers will likely break above that level and test 84.05. Conversely, the sellers will have the upper hand if the pair breaks below 83.90. The downside will likely find the first support at 83.85, below which the upside narrative will be invalid. Also, such extended control by the sellers could see the pair test 83.80.