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USD/INR Forecast: USD to Rupee Outlook Amid a Pullback

The USD/INR price has pulled back slightly in the past few days as some bulls take profit. The USD to INR exchange rate is trading at 79.71, which is lower than the year-to-date high of 80.21. The Indian rupee, like most emerging market currencies, has crashed by over 10% against the US dollar in 2022. 

Hawkish Fed and RBI

The USD/INR price has pulled back recently as investors focus on the actions by the Federal Reserve and the Reserve Bank of India (RBI). Last week, data published in the US showed that inflation surged to a multi-decade high of 9.1% in June. This increase was much better than the median estimate of 8.8%. It was also significantly higher than the Fed’s 2.0% inflation target.

Therefore, some Fed officials, including Christopher Waller, believe that the bank should go big in the coming meeting. After hiking by 150 basis points this year, he argued that the committee should consider a whopping 100 basis point hike. The case for a 1% increase also emerged after the strong American jobs data and retail sales numbers.

Meanwhile, the RBI has also embraced a significantly hawkish tone. Like other central banks, it has implemented several rate hikes this year. However, some analysts believe that the bank has no major urgency for being extremely hawkish in its August meeting. Besides, the economy is doing relatively well, helped by cheap gas imports from Russia. 

The USD to INR current price action is mostly because it hit a major resistance level. Historically, an asset’s price tends to waver after such a situation happens. This also explains why the EUR/USD pair has moved above parity just a week after it dropped below 1.000.

USD/INR forecast

The four-hour chart shows that the USD/INR pair has been in a strong bullish trend in the past few months. The pair managed to move above 80 as I had written in my last Indian rupee prediction. It remains above all moving averages and has moved slightly below the upper side of the ascending channel.

Therefore, the USD to rupee price will likely resume the bullish trend as investors target the YTD high of 80.20. A move above that level will bring my recent outlook for 83.50 to view. A drop below the support at 79.35 will invalidate the bullish view.