USD/INR exchange rate dangerous pattern points to a crash to 77.97

on Jan 27, 2023
  • The USD/INR exchange rate has made a double-top pattern on the daily chart.
  • Double-top is one of the most accurate reversal patterns in analysis.
  • The pair will likely crash to 77.97 in the next few weeks.

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The USD/INR exchange rate has formed an extremely bearish pattern signaling that it could undo some or most of the gains it made in 2023. The USD to INR price was trading at 81.47 on Friday, meaning that it has retreated by 2.13% from its highest point in 2023.

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Fed decision ahead

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The USD to Indian rupee has declined mostly because of the recent dollar weakness. One of the top forex news of this year is the fact that the US dollar index (DXY) has plunged to the lowest level in eight months. It has fallen by over 12% from the highest level in 2023 and is now hovering near the important support at $100.

The US dollar has dropped as investors have embraced a relatively strong risk-on sentiment recently. They have done that by moving to riskier assets, which explains why Bitcoin is trading at $23,000 while global stocks are in an unstoppable rally. Emerging market currencies like the South African rand and Chinese yuan have also done well.

Focus now shifts to the upcoming American inflation data scheduled for Friday and next week’s Fed decision. The Personal Consumption Expenditure (PCE) index number, which will come out on Friday, is expected to show that inflation eased slightly in December. PCE is an important number since it is the Fed’s most important inflation gauge.

The USD/INR will also react to next week’s Fed decision. In it, the Fed is expected to deliver the second straight 0.50% rate hike. With inflation easing and with investors having a risk-on sentiment, there is a likelihood that officials will attempt to taper this mood by sounding hawkish.

On the other hand, the Reserve Bank of India (RBI) will hold its meeting on February 8. While it will also hike rates, analysts expect that it will signal the end of tightening.

USD/INR forecast

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USD/INR chart by TradingView

Turning to the 1D chart, we see that the USD to INR forex exchange rate formed a double-top pattern between October and January of this year. In price action analysis, this is one of the top reversal patterns. Its neckline was at 80.46, the lowest point on November 11.

The pair has also moved below the ascending trendline that is shown in black. This trendline connects the lowest points since January 2022. It has also moved below the 50-day exponential moving average.

Therefore, the pair will likely continue falling as sellers target the neckline of the double-top pattern at 80.46. A break below that level will take the next reference point to 77.97. This price is derived by measuring the distance between the double-top and the neckline.


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