USD/INR forecast: USD to INR prepares a major breakout

The USD/INR pair remained in a tight range as investors waited for the upcoming US non-farm payrolls (NFP) data. The USD to INR price is currently at 77.57, where it has been in the past few days. This exchange rate is slightly below its all-time high of 77.86 and about3.14% above the lowest level in April.

US NFP data ahead

The USD/INR pair has moved sideways in the past few weeks amid a convergence of monetary policy between the Federal Reserve and the Reserve Bank of India (RBI).

After months of reluctance, the RBI decided to start hiking rates recently in its battle against inflation. The bank is expected to continue hiking when it concludes its meeting on Wednesday next week. Economists expect that the bank will hike by 0.50% and hint about more hikes in the coming month.

This is happening as consumer prices in India remain stubbornly high. The most recent economic numbers revealed that the country’s inflation surged to the highest point in 18 months in April.

The RBI’s policy has concerged with that of the Federal Reserve, which has also embraced a more hawkish tone. The bank made a 0.25% hike in March and followed it with a 0.50% rate hike in May. At the same time, officials warned that it will continue hiking by 0.50% in the next three meetings.

Most importantly, the Fed started implementing its quantitative tightening policy this week. In it, it will reduce its balance sheet by $47.5 billion in the coming months. It will then double this amount later this year. 

The next key catalyst for the USD to INR will be the coming US jobs data. Economists expect the data to show that the country’s unemployment rate declined to 3.5% in April.

USD/INR forecast

The four-hour chart shows that the USD to INR pair has been in a tight range in the past few days. A closer look shows that the pair has formed a symmetrical triangle pattern. It is also oscillating along the 25-day and 50-day moving averages. It is also slightly above the 23.6% Fibonacci retracement level.

Therefore, the USD/INR price will likely have a bullish breakout in the coming weeks. If this happens, the next key resistance level to watch will be at 77.90.