USD/INR is showing minor gains today as the dollar strengthened against the Indian rupee on Monday. However, the pair is struggling to break above a diagonal resistance, and a recent breakdown is signaling more downside for the coming days.
On a monthly timeframe, the Indian rupee has been in a very tight consolidation range since October 2022. This sideways price action is due to RBI interventions as the central bank kept offering dollars in order to keep the rupee stable. Consequently, the rupee remained strong compared to other major currencies despite the DXY index soaring earlier this year.
The recent downtrend in the dollar strength index has weakened the demand for the US dollar. The decreasing inflation is the primary reason behind this weakness. As a result, USD/INR is having its first red month after five consecutive months of uptrend. Technical analysis suggests that the pair may go lower as it has broken below the uptrend on the daily chart.
On Monday, the dollar slid against the pound and Japanese yen but showed minor gains against the Indian rupee and euro. However, the true market sentiment will be revealed once the markets open tomorrow after the Christmas holiday.
I mentioned a specific trading range in my previous analysis. The middle of this trading range was tagged last week, from which the price got a bounce. Currently, USD/INR is retesting the upward trendline after breaking below it quite recently. Most likely, the forex pair will get rejected from the current level, and I don’t see it rising above 83.3.
Such a rejection could pave the way for the downside target of 82.80 which is the lowest level of the trading range as shown in the following USDINR chart. Due to the ongoing holiday season, the volume is expected to remain low in the coming days.
