USD vs Rupee forecast ahead of US inflation data

The USD/INR price continued rising on Tuesday as the US dollar index (DXY) staged a comeback ahead of the upcoming US consumer inflation (CPI) data. It jumped to a high of 82.42, the highest level since March 2.

US consumer inflation ahead 

The USD/INR price continued rising as the DXY index bounced back. It rose by 30 basis points to $103.46, which was higher than Monday’s low of $103. This rebound happened as the bond market bounced back. The 10-year and 5-year bond yield rose to 3.5% and 3.6%, respectively. 

The bond market has been under pressure in the past two days as investors assess the next actions by the Federal Reserve following the collapse of Silicon Valley Bank (SVB) and Signature Bank. Some analysts, including those from Goldman Sachs and ING, believe that the Fed will likely slow its rate hikes in the coming meetings. 

The next key catalyst for the USD/INR price will be the upcoming US consumer price index (CPI) data scheduled for Tuesday. Economists believe that the headline consumer inflation dropped from 0.5% to 0.4% on a month-on-month basis. They also expect that CPI dropped from 6.4% to 6.0%, which will also be higher than the Fed’s target of 2.0%. 

Core inflation, which excludes the volatile food and energy products, is expected to come in at 0.4% on a MoM basis. On a YoY basis, the core CPI is expected to have dropped from 5.6% to 5.5%. These inflation number are expected to show that prices remain stubbornly high. 

Therefore, the Federal Reserve is in a fix. On the one hand, it needs to continue hiking interest rates in a bid to continue slowly inflation. However, more rate hikes will likely lead to more strains in the economy. 

USD/INR technical analysis 

USD/INR chart by TradingView

The four-hour chart shows that the USD to INR price has made a strong bullish trend in the past few days. This rebound started when the pair dropped to a low of 81.56 on March 6.

The pair has moved above the 50-period exponential moving averages (EMA) and is approaching the key resistance level at 82.50. The latter was an important level since it was the neckline of the double-top pattern at 82.96. It has also moved slightly above the key resistance level at 82.28 (8 March high). 

Therefore, the USD/INR price will likely continue rising as buyers target the key level at 82.51. If this happens, it will likely be a break and retest pattern, which will see it resume the bearish trend and test the support at 81.97.