USD/INR most overbought in 12 months as India’s Covid cases soar
- The USD/INR pair has rallied after the ongoing surge of coronavirus cases.
- The number will keep rising ahead of an Indian festival and the slow vaccination push.
- Focus shifts on what the RBI will do to support the economy.
The USD/INR price rallied to the highest level since August last year as forex traders continued to worry about the rising Covid-19 cases in India. It rose to 75.15, which is about 4% above the lowest level this year.
India coronavirus cases rise
The India coronavirus crisis is getting worse as the number of cases soar. The country confirmed more than 168,000 new cases yesterday, the highest number on record. This brought the total number of reported cases to more than 13.6 million and the number of deaths to more than 170,000. As a result, the country overtook Brazil to become the second-worst affected country after the United States.
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This trend could continue as thousands of Indians gather at the Ganges river for an annual Hindu festival. Also, the country has been relatively slow in delivering vaccines to its citizens. Recent data shows that only 4% of the country’s 1.3 billion people have received a shot.
The surge in India’s coronavirus cases comes a week after the Reserve Bank of India (RBI) delivered a relatively dovish interest rate decision. The bank, as expected, left interest rates unchanged but started quantitative easing program. It is buying government bonds worth $14 billion, becoming the first emerging market central bank to offer such a program.
The USD/INR is also reacting to the latest Indian inflation and industrial production data. The numbers revealed that the headline consumer price index (CPI) rose from 5.03% in February to 5.52% in March.
In February, industrial production declined by more than 3.6% because of the pandemic. On Wednesday, the statistics agency will publish the latest wholesale price index (WPI) followed by trade numbers on Thursday.
The USD/INR will also react to the latest data from the US like inflation, trade, and initial jobless claims that are scheduled for later this week.
USD/INR technical forecast
The daily chart shows that the USD/INR pair has bounced back recently because of the dovish RBI decision and the rising number of Covid cases in India. The price has moved above the 15-day and 25-day moving averages while the Relative Strength Index (RSI) has risen to the highest level since March last year. This means that the Indian rupee is the most oversold in more than 12 months. In the near term, the pair will likely keep rising as bulls target the next key resistance at 76.