USD/INR analysis: levels to watch as the RBI leaves rates intact

The USD/INR exchange rate was still hovering near its highest level on record after the latest interest rate decision by the Reserve Bank of India (RBI). It was trading at 82.52, a few points below its record high of 83.15. 

RBI interest rate decision

The Reserve Bank of India concluded its two-day meeting on Thursday. Unlike Australia’s and Canadian central banks, the bank decided to leave interest rates unchanged at 6.50%. In a statement, the bank said it was still observing the inflation trends. The RBI also left the cash reserve ratio at 4.50%.

Recent data shows that inflation in the country is moving downward. A survey by Reuters showed that economists expect that inflation rose by 4.42% in May this year, down from the previous month’s 4.70%. 

If this view is accurate, then it means that the country’s inflation dropped to a 20-month low, signaling that the bank’s actions are working. Still, the RBI left the door open for more hikes since inflation is not expected to move below 4% soon. 

The USD/INR price remained unchanged because the action by the RBI was in line with expectations. If it had surprised the market, the pair would have made some major moves as we saw with the Canadian and Australian dollars.

USD/INR technical analysis

USD/INR chart by TradingView

The daily chart shows that the USD/INR has been relatively stable this year. This is unlike other emerging market currencies like the South African rand, Turkish lira, and the Argentinian peso that have plunged this year.

The pair has found a major barrier at 83.15, where it has struggled to move above since December last year. Further, it has formed an ascending triangle pattern shown in blue. In price action analysis, this pattern is usually a bullish sign. 

The USD to INR price has moved above the 50-day exponential moving average (EMA) while the Awesome Oscillator has moved above the neutral point. 

Therefore, the outlook of the pair is neutral until it moves above the upper barrier at 83.15. If this happens, the next level to watch will be 84. 

Still, there is also a possibility that it will drop since 83.15 could be a triple-top pattern. The bearish view will be confirmed if it drops below 82.

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