The USD/INR price formed a long-legged doji pattern as investors waited for the upcoming interest rate decision by the Reserve Bank of India (RBI). The pair rose to a high of 78.98, which was about 1% above the lowest level this week. This price is about 1.62% below the highest level in July.
RBI interest rate decision
The RBI started its two-day monetary policy meeting on Wednesday. Analysts expect that the RBI will continue with its tightening policy in a bid to contain the rising inflation.
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Most economists expect that the bank will hike its main rate by 35 basis points to 5.25%. They also see it leaving the reverse REPO rate and the cash reserve ratio unchanged at 3.35% and 4.50%, respectively.
Still, unlike most central banks, the RBI is not under intense pressure to hike interest rates. For one, India’s inflation has risen at a relatively slower rate compared to peers. India has benefited from Western sanctions on Russia to scoop cheap oil and natural gas.
India’s inflation has been rising gradually since September last year and has remained above the RBI tolerance band. It remains above 7% although analysts expect that it is close to its peak.
At the same time, worries of an incredibly cheap Indian rupee have subsided in the past few weeks. The currency has fallen by more than 1.62% from its highest point this year.
There are signs that the central bank may be turning to the spot market from forwards in a bid to shield the rupee. According to Bloomberg, the RBI has seen its foreign exchange reserves plummet by about $30 billion from the end of May to the current $573 billion. This decline is partly because of the RBI has been selling more US currency.
USD/INR forecast
The four-hour chart shows that the USD/INR forex pair has been in a strong bearish trend in the past few months. This decline faded on Wednesday as investors repositioned for the upcoming RBI interest rate decision.
The USD to INR exchange rate formed a long-legged doji pattern, which is usually a bullish sign. In price action analysis, this pattern is usually a bullish sign. At the same time, the Stochastic Oscillator is pointing upwards. Therefore, the USD to rupee price will likely continue rising as bulls target the key resistance at 79.50.
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Source: https://invezz.com/news/2022/08/03/usd-inr-usd-to-rupee-forms-doji-ahead-of-rbi-decision/