- USD/INR maintained a massive recovery over the last few days.
- Federal Reserve and RSPI seem to diverge.
- RBI might slow its rate hikes in the short term.
USD/INR had its price moving sideways today as market players contemplated the recent interest rate moves by the Reserve of India and the Federal Reserve.
Also, the pair wavered due to the previous week’s stable United States jobs data plus the coming inflation figures. While publishing this post, it traded at 79.58, substantially higher than the 78 low of last week.
U.S Inflation Numbers Ahead
USD/INR price enjoyed a recovery period as market players pondered the diverging rate policy between the Reserve Bank of India and the Federal Reserve. The RBI introduced a 0.50% rate hike last month, citing soaring inflation.
That represented the 2nd rate hike from the bank this year. Meanwhile, financial analysts trust the bank might be somewhat reluctant to increase rates later in 2022.
On the other hand, the Fed executed a 0.75% rate increase in July, bringing the YDT hike to 225bp. The latest statement showed Federal officials such as James Bullard and Mary Dally insisting that more rate increases were essential in the upcoming months.
Non-farm payrolls (NFP) data (on Friday) confirmed that the central bank would continue rising interest rates. The United States economy added more than 528K jobs last month as the unemployment rate plummeted briefly to 3.5%.
The next catalyst for the USD-INR exchange rate is Wednesday’s inflation data by the United States. Financial experts expect the nation’s inflation to have plunged briefly to 8.7% from 9.1%.
This narrative remained logical as gas prices dropped from $5 per gallon YTD to around $4.3 last month (July). Also, the USD-INR price will respond to Friday’s Indian trade and industrial & manufacturing production stats.
The USD-INR downside bias ended the past week when the pair plunged towards the 78.14 support, according to the 4-hour chart. It reacted to the drop with a rebound, climbing beyond the 25- and 50-day Moving Averages.
Meanwhile, the MACD moved beyond the neutral point. The moving average has created a bullish cross setup. Thus, USD-INR might keep surging as buyers target the crucial level at 8-. A decline beneath the 79 support will cancel the bullish narrative.