Rupee forms a triangle pattern ahead of RBI decision

The USD/INR exchange rate has consolidated in the past few days as investors assess the next actions by the Fed and the RBI. The pair was trading at 82.22 on Wednesday, where it has been for a while This price is a few points below its all-time high of 83.18.

Mixed Fed hikes outlook

The USD to INR exchange rate has moved sideways recently following this month’s interest rate decision by the Federal Reserve. In it, the bank decided to increase rates by 0.25%, pushing the official deposit rate at 5%, the highest level in more than a decade.

As I wrote in this article, analysts are torn on what to expect from the Fed in the coming meetings. Blackrock believes that the Fed will ignore concerns in the banking sector and continue hiking rates this year. They expect that rates will peak at about 6%.

Analysts at ING, on the other hand, believe that new shocks in the economy will push the Fed to cut interest rates later this year. Most doves believe cite the yield curve, which has inverted to the lowest level in years.

RBI interest rate ahead

The next key catalyst for the USD/INR price will be the upcoming interest rate decision by the Reserve Bank of India (RBI). Like the Fed, the RBI has been tightening its policies in the past few months, which has pushed rates to the highest point in years.

In February, the RBI hiked rates by 0.25% and signaled that more hikes could come in the coming meetings. Specifically, the bank said that it would continue to maintain strong vigilance against inflation. The headline CPI jumped by 6.4% in February while core CPI remained above 6
% for 17 months straight.

Analysts also have mixed views of what to expect on Monday. Some believe that the bank has more room to deliver a 0.25% increase. In a statement, an analyst at L&T said that he expects another increase. He said: 

“Inflation is way above the tolerance limit. So at this juncture, a lot depends on how global central banks deal with their inflation problems, and that’s the implication for emerging market economies like India.”

USD/INR forecast

USD/INR chart by TradingView

The daily chart shows that the USD/INR price has bee in a consolidation phase in the past few days. In this period, it has formed a symmetrical triangle pattern that is shown in red. This pattern is notable because it is nearing its confluence level. Oscillators like the Relative Strength Index (RSI) and the MACD have been moving sideways. 

Therefore, at this stage, the outlook of the USD to rupee is neutral as attention remains on the RBI. The pair will also make a breakout in either direction after the decision. As such, the key support and resistance levels to watch will be at 81.72 and 82.90. A break below the support at 81.72 will signal the start of a new Indian rupee rally.