The GBP/INR has crashed to new multi-year lows following the continued softening of the British Pound across several major currency pairs. The British Pound crashed to new lows against the US Dollar and is testing 11-year lows in its pairing with the Indian Rupee. Despite paring some of these losses, the GBP/INR remains under pressure.
The major component of the headwinds encountered by this pair is the wide-ranging tax cuts announced by the UK Chancellor of the Exchequer, Kwesi Kwarteng. The scope of the cuts is unprecedented, sending markets into turmoil and striking the British Pound. Furthermore, the Reserve Bank of India (RBI) is expected to raise interest rates when it announces its decision later this week as India’s inflation hits 7%.
The RBI’s decision will be announced on Friday, with several investment banks and a majority of polled economists predicting a 50 basis points rate hike. This move would take the repo rate to 5.9%. The GBP/INR is on its way to a third week in the red, losing more than 5% in the last two weeks of trading.
The pair has found intraday support at 85.0748 (June 2011 lows). This marks the completion of the expanding triangle pattern’s measured move. The bounce on this level now targets the 86.1935 resistance, formed by the low of the recent 4-hour candle. Above this level, the 87.7606 resistance forms the next available target to the north. There are additional upside targets at the 88.7534 price mark and the 89.7622 price level (25 March 2020 low).
A retest of the intraday low has to follow a rejection and pullback at the 87.7606 resistance. A breakdown of this low creates an opportunity for the GBP/INR to push to new lows. The 27% Fibonacci extension at 83.2239 and the 80.8506 price mark (61.8% Fibonacci extension) form potential pivots for downside price action.