USD/INR Price Forecast – Traders Stay Cautious Near The 83 Level

Key Insights

• India’s Inflation Rate grew from 5.72% to 6.52%. 
• Tomorrow, traders will be focused on the inflation data from the U.S., which may have a significant impact on USD/INR dynamics. 
• RBI may try to defend the 83 level. 

Inflation Exceeded Analyst Expectations

USD/INR settled near the 82.60 level after the release of India’s Inflation Rate report. The report indicated that Inflation Rate increased from 5.72% in December to 6.52% in January, compared to analyst consensus of 5.9%.

Last week, RBI raised the Interest Rate from 6.25% to 6.5%, in line with the analyst consensus. The Bank noted that outlook for inflation remained mixed. The Bank also added that “further calibrated monetary policy action is warranted to keep inflation expectations anchored, break core inflation persistence and thereby strengthen medium-term growth prospects.”

Today’s inflation report showed that rising prices remained a problem for India’s economy. Inflation peaked near the 8% level in 2022, but prices have started to move higher again.

The Upside Trend Remains Strong

USD/INR did not manage to get to the test of the recent highs at 82.86 after the release of inflation data. However, the upside trend remains strong, and the key question is whether the 83 level will hold in the upcoming weeks.

From a big picture point of view, USD/INR managed to stabilize in the 81 – 83 range. RSI is in the moderate territory, and there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

Fed’s moves will remain an important catalyst for USD/INR. Tomorrow, U.S. will release its inflation data for January. U.S. Inflation Rate is expected to decline from 6.5% in December to 6.2% in January.

In case Inflation Rate exceeds analyst expectations, traders will likely rush to buy the U.S. dollar, which will be bullish for USD/INR. In this scenario, a test of the 83 level could be possible. However, traders should note that RBI may try to defend the 83 level if USD/INR gains strong momentum.

For a look at all of today’s economic events, check out our economic calendar.