USD/INR forecast: Narendra Modi wins, RBI rate decision in focus

The USD/INR exchange rate dived hard on Monday morning ahead of the official Indian election results scheduled on June 4th. The pair slumped to a low of 83, its lowest level since March 20th. It has dropped by 85 basis points from its highest point this year.

India election results and RBI decision

The Indian rupee will be in the spotlight this week as India concludes its election and as the Reserve Bank of India (RBI) delivers its interest rate decision.

Exit polls show that Narendra Modi will likely be declared the country’s president for the third term. There are signs that he will reach the 400 parliamentary seat majority that his party was targeting.

This performance is a sign of approval of Modi’s administration that has sparked a $534 billion infrastructure boom in the country. 

In his administration, India has become one of the fastest-growing countries globally. Last year, it jumped by over 7%, a move that transformed it to the fifth-biggest economy in the world with  GDP of over $3.3 billion.

India has become a leading player in industries like manufacturing and energy. The manufacturing boom has seen companies like Tesla and Apple move to the country as they work to de-risk from the Chinese market. 

Many American companies like Walmart, Meta Platforms, and Google have increased their presence in the country. At the same time, Indian stocks have surged to a record high, with the Nifty 50 and Sensex beating their Chinese peers.

Looking ahead, the other important USD/INR news will be the upcoming Reserve Bank of India (RBI) interest rate decision set for Friday. Economists believe that the central bank will leave interest rates unchanged at 6.50% and point to a rate cut later this year. Recent data shows that India’s inflation has stalled at 4.83% after peaking at 7.4% in 2023. 

The USD/INR pair will also react to the upcoming US nonfarm payrolls (NFP) data to be released on Friday. Economists expect the numbers to reveal that the unemployment rate remained at 3.9% as the economy created over 150k jobs.

USD/INR technical analysis

USD/INR chart by TradingView

The daily chart shows that the USD to INR exchange rate peaked at 83.71 in April and has now pulled back to 83. It has crashed below the key support at 83.46, its highest swing in November last year.

The pair has dropped below the 50-day and 25-day Exponential Moving Averages (EMA). It also retreated slightly below the key support at 83.01, its lowest point in May. 

Therefore, the pair will likely have a bearish breakout as sellers target the next key support level at 82.65, its lowest swing on March 8th.