USD/INR Price Prediction Ahead of RBI’s Monetary Policy

The USD/INR advances today by 0.10% above its all-time high of 88.12, posted last week. The Indian markets are awaiting the Reserve Bank of India’s monetary policy announcement on Wednesday.

Until the monetary policy announcement, it’s expected that the USD/INR will be trading sideways without a clear direction. Market participants are wondering whether the RBI will set a monetary-easing campaign with a 25 basis points cut in rates, or will hold the Repo rate a 5.5%.

In light of trade tensions between the United States and India, a dovish RBI is anticipated. The US has hiked the fee for H-1B visas to $100k and imposed 100% tariffs on pharmaceutical imports. Indian’s IT and healthcare industries have been significantly affected as they rely heavily on exports to the U.S.

Moreover, the ongoing outflow of foreign funds from the indian stock market weighs on the Indian Rupee. The FIIS sold shares worth Rs. 2831,59 crores in the indian equity market by Monday.

Key Factors Affecting USD/INR:

• The US Dollar Index is softer amid US Government shutdown risks. At the time of writing, the DXY trades around 98.00.
• Moreover, Republicans failed to persuade Democrats to support the short-term funding bill.
• Both parties are blaming each other over the stopgap bill, which must pass before Tuesday’s midnight deadline. Democrats say they will only support the bill in the Senate if Congress reverses the recent cuts to healthcare benefits.
• The uncertainty around the bill is creating pressure on the U.S. dollar, as investors worry about a possible government shutdown.
• The increasing bets of additional Fed Cuts this year. This puts extra pressure on the US Dollar.
• According to the CME FedWatch tool, market participants are pricing an 89% probability that the Fed will cut interest rates by 25bps to 3.75%-4.00% in October’s meeting.
• Investors’ focus has shifted to the U.S. JOLTS Job Openings data for August. This data helps them anticipate how the labor market is performing and the most probable Fed decision.

USD/INR Price Prediction | The Currency Pair Eyes New All-Time Highs

The USD/INR trades close to its all-time high. The RSI is at the 60 mark, suggesting bullish momentum that could boost the price to higher levels. A clear 1-hour close above 88.90 could open the way toward 89.00 and 89.50. On the upside, 90.00 is the main barrier for the pair. On the downside, if the currency pair fails to break above 88.90, it could fall toward 88.29.

Looking at the daily chart, the price action appears to be forming a cup and handle pattern. This indicates a continuation of bullish momentum. The U-shape of the cup has already formed, with signals suggesting the handle is developing to confirm the pattern. Check the previous week’s analysis.