- The Reserve Bank of India is not calling me on the phone to tell me what they are doing, but it has become apparent for the time being the USD/INR has found a ‘happy place’.
- Price action in the currency pair has been tight most of the week and the high and low for the USD/INR occurred on the 22nd of February within a seven hours span.
Since a high of 82.9700 was challenged and followed by a low of nearly 82.7700, the USD/INR has progressed largely between the 82.8160 and 82.9250 ratios with some occasional outliers. As of this writing the USD/INR is near the 82.9000 level. The ability of the currency pair to remain in a tight value realm has been demonstrated and the question some speculators may be asking is if this perceived lower realm will be maintained. Traders must be cautious because of the differential between the bid and ask of the USD/INR, this is why entry price orders must be used by speculators unless they are willing to use a live ‘market’ fill which can prove dangerous.
USD/INR and USD Centric Considerations
There is plenty of important economic data coming from the U.S today and tomorrow, which in theory should be able to cause volatility in the currency pair. The broad forex market has experienced a whirlwind of choppiness over the past two months due to global financial institutions shifting behavioral sentiment based on their outlooks regarding the U.S Federal Reserve.
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However, the price action in the USD/INR over the past couple of months points to an invisible hand guiding the currency pair. The suspicion the Reserve Bank of India is keeping a firm grip on the value of the USD/INR is not mine alone. The U.S data which will be released today via the GDP and inflation numbers coming tomorrow could shake the outlook of the broad Forex market and it will be intriguing to see if the USD/INR sees a suddenly wider price range today and tomorrow.
Broad Market Correlations and the USD/INR
While the USD has certainly been choppy against many major currencies, the overall strength of the Indian Rupee is noteworthy because of its relative calm. If U.S growth numbers today show signs of erosion, this in theory should be able to create more bearish activity in the USD/INR. And if U.S inflation statistics tomorrow also show they have declined the USD/INR could find more sellers. However, inflation in the U.S has remained stubborn and betting on a result before tomorrow’s U.S PCE Price Index report would be a very speculative bet.
- Short-term speculators in the USD/INR should stay alert to U.S data today and tomorrow, but the tight range within the currency pair should also cause consideration of the Reserve Bank of India which seems to be working behind the scenes to create equilibrium.
- Traders should use strict entry price orders, and stop loss and take profit tactics to guard against sudden gyrations in the USD/INR today and tomorrow.
USD/INR Short Term Outlook:
Current Resistance: 82.9140
Current Support: 82.8750
High Target: 82.9260
Low Target: 82.8610
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