USD/INR is trading sideways on the day when the US Federal Reserve is making its crucial interest rate decision. On a higher timeframe, the Indian rupee has been constantly weakening against the greenback since the end of August 2023.
At press time, USDINR stood at 83.335 during the New York session as the markets awaited the FOMC statement. After the recently released CPI data for November 2023, analysts are expecting the US Fed to keep the rates constant for the third consecutive FOMC meeting. As a result, the CME Fed Watch Tool shows only a 1.8% chance of another rate hike.
However, the most critical thing will be the tone of the FOMC statement and the following press conference, as investors will look for hints to determine the timeline for potential rate cuts. due to this reason, the Indian rupee will likely show an increased volatility tomorrow.
USD/INR gave its highest weekly close last week at 83.407. However, the analysts believe that the repeated interventions from the Reserve Bank of India are limiting the upside in the forex pair beyond this level. Consequently, the US dollar to Indian rupee exchange rate is down 0.10% this week.
The following chart is self-explanatory. You can see how the price action has formed an ascending triangle, but the Reserve Bank of India’s interventions are stopping USD/INR from breaking above the 83.33 resistance level.
A major cause of concern is the fact that the record lows for the Indian rupee come despite a downtrend in the dollar strength (DXY) index. Therefore, if the US Fed adopts a hawkish approach in the coming months, the rupee may further devalue to fresh lows.
To avoid the bearish outlook, INR needs to gain acceptance below 83.33 level which may put a move toward the 82.81 level on the cards.
