USD/INR is having a major pullback this week. Since the start of the week, the US dollar to Indian rupee exchange rate has constantly declined. Consequently, the rupee is gaining strength after a strong sell-off in the past few weeks, suggesting that the central bank might be intervening.
On Wednesday, the USDINR pair is trading at 82.87 after a 0.22% decline from yesterday. On a weekly timeframe, this translates into a 0.35% drop. The correction follows a 0.33% gain last week when the Indian rupee hit its lowest level against the greenback.
Since last year, the Reserve Bank of India (RBI) has been actively intervening to stabilize the local currency. After a recent surge in the DXY index, the central bank is repeatedly intervening with non-deliverable forwards and over-the-counter. The move has crushed the dreams of the short sellers of Indian rupee, who now appear to be quite exhausted.
The dollar strength (DXY) index is having a pullback today which also acted as a headwind for the USD/INR. A deeper correction in the index may further strengthen the rupee in the coming weeks. Let’s analyze the forex pair to see where it may go from here.
I have repeatedly mentioned a slanting resistance line in my previous USDINR forecasts. This trendline was broken last week as the pair soared to a new all-time high. As visible in the following chart, the pair is now retesting this trendline to confirm the breakout. The next key level to watch would be the 82.20 level, where lies the 200-day MA.
Considering the RBI’s commitment to keeping the exchange rate stable, USD/INR forecast is looking bearish for the short term. Nevertheless, the central bank might be unable to control the exchange rate if DXY Index gains strength above 103.5 points.
In the meantime, I’ll keep sharing the updated USDINR forecast and my personal trades on Twitter, where you are welcome to follow me.
This post was last modified on Aug 23, 2023, 09:27 BST 09:27