GBP/INR double-tops as USD/INR forms an ascending triangle

By:
on Apr 21, 2023
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  • The GBP/INR exchange rate has formed a double-top pattern.
  • The USD/INR pair has formed an ascending triangle pattern.
  • There is a likelihood that the RBI and Fed will have a divergence.

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The GBP/INR exchange rate has gone nowhere in the past few weeks as the actions of the Bank of England (BoE) and Reserve Bank of India (RBI) diverge. It was trading at 102.17 on Friday, a few points below the year-to-date high of 102.67. It has jumped by over 19% from the lowest point in 2022. 

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On the other hand, the USD/INR was trading at 82.13, where it has been in the past few weeks. This price is a few points below the year-to-date high of 83.25.

RBI and BoE divergence

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There is an increasing possibility that the RBI and the BoE will take divergent paths in the next few months as UK inflation remains stubbornly high. Data published on Wednesday showed that the UK inflation remained at an elevated level in March.

Data by the Office of National Statistics showed that the headline consumer price index dropped to 10.1% in March from the previous month’s increase of 10.4%. These numbers mean that the country’s inflation is much higher than other countries, including those in the European Union.

The ONS noted that food prices were the main drivers of inflation. Food and non-alcoholic beverages saw their prices jump by 19% in March. That was the highest increase since 1977. Core inflation, which excludes food and energy, also remained at a high point in March.

Therefore, the Bank of England (BoE) is between a rock and a hard place considering that the labor market remains tight. As such, analysts believe that the bank will hike rates again when it meets in May. It could also hike more in the next meetings even as the UK remains in a stagflation period.

The RBI, on the other hand, is expected to continue pausing its interest rate hike policy for a while. In April, the bank decided to pause hikes even as it warned that it could be forced to deliver more hikes this year.

GBP/INR price forecast

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GBP/INR chart by TradingView

The GBP/INR exchange rate has been in a slow upward trend in the past few months. Recently, the pair has found a resistance at the key point at 102.67, the highest point on December 13. It has formed what looks like a double-top pattern whose neckline is at 96.86. The pair remains above the 25-day and 50-day moving averages.

Therefore, the GBP/INR pair will remain in this range for a while and then have a bearish breakout because of the double-top pattern. If this happens, the pair will likely drop to the key support at 96.85.

On the other hand, the USD/INR pair has formed an ascending triangle pattern, signaling that it will likely have a bullish breakout. If this happens, the pair will likely jump to the key resistance at 83.

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