The USD/INR exchange rate has been in a consolidation phase in the past few days ahead of the upcoming US consumer inflation data. The pair was trading at 82, which was a few points below the year-to-date high of 83.15.
US inflation and India growth
There are two important forex news to focus on. First, there is the rising risk that the US will default on its debt if Democrats and Republicans fail to reach an agreement on the debt ceiling issue. A meeting between Joe Biden and congressional leaders ended without a deal on Tuesday and the two sides vowed more talks in the next few weeks. The next meeting will happen on Friday.
Still, most analysts believe that the two sides will reach an agreement before the country runs out of money in June. They all understand the risks of not raising the debt ceiling to the economy. Experts believe that the prices of most assets will crash and the unemployment rate to rise.
The other key USD news to watch will be the upcoming American consumer price index (CPI) data scheduled for Wednesday. Economists believe that America’s inflation eased slightly in April even as the unemployment rate dropped to 3.4%. Precisely, economists expect the data to show that the headline inflation remained at 5.0% while core inflation dropped to 5.4% in April.
A higher figure than expected will open the opportunity for the Fed to deliver one more rate hike in June this year. The bank decided to hike rates by 0.25% in its meeting last week.
Meanwhile, the Indian economy is expected to do modestly well this year, helped by the growing manufacturing sector. A report by the WSJ noted that India had evolved to become the main rival to China’s manufacturing sector. The report cited companies like Apple, Vestas, and Samsung that are shifting some of their manufacturing to the country.
USD/INR technical analysis
USD/INR chart by TradingView
The daily chart shows that the USD/INR exchange rate has been in a consolidation phase in the past few months. In this period, the pair has found a strong resistance at 83.15, where it failed to move above starting in November last year.
The pair has also found a slanting support, which connects the lowest levels since November 15. This pattern resembles an ascending triangle, which is usually a bullish sign. Therefore, there is a likelihood that the pair will have a bullish break-out in the next few weeks. This view will be invalidated if the price moves below the ascending trendline since it will mean the upper resistance at 83.15 is a triple-top pattern.
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