- Summary:
- The USDINR trading pair is up despite some traders dumping the US dollar as uncertainty mounts over US economy. What defines the pair?
USDINR traded upwards on the opening day of the week as the global trade tariff war continued to bite. The currency pair traded at 85.74 at the time of writing, up by 0.8% and on course to register its second successive daily gain. Nonetheless, some traders continue to dump the dollar amid growing skepticism over the trajectory of the US economy.
Asian stocks extended their decline on Monday, with benchmark indices Sensex dropping down by 2.9% and Nifty 50 Index losing 3.24%. Hong Kong’s Hang Seng closed at -13.22% and SSE Composite Index lost 7.34%. The comparatively larger losses by markets in China and Hong Kong underline Indian equities markets’ relative stronger position, which will limit the USDINR pair’s upside.
Also, while India is among the nations with the highest US tariff hikes, its 27% rate is lower than its Asian neighbours against which it competes for the US market. For instance, Vietnam and Bangladesh, India’s competitors for the textile market had their tariffs at 46% and 37% respectively. That could ultimately see India outmuscle them and help bring in more dollar inflows.
Meanwhile, the Federal Reserve is likely to slash interest rates in May, as per CME Fed Watch Tool. That said, the Reserve Bank of India (RBI) is expected to slash interest rates by 25 basis points when it makes its decision on Wednesday. That scenario limits the rupee’s upside and provides support to the USDINR pair.
USDINR Prediction
USDINR pivots at 85.61 and the upside will likely continue if the trade action stays above that level. The first resistance will likely be at 85.87. However, an extended control by the buyers will break above that level and attempt the next hurdle at 86.00.
On the other hand, moving above 85.61 will shift the momentum to the downside. In that case, USDINR could find the first support at 85.43. Breaking below that level will invalidate the upside narrative. In addition, that momentum could extend the downside to test 85.24.
