Bulls pause after a three-day rise as USD/INR pushes higher towards the monthly top. In anticipation of Fed Chair Jerome Powell’s speech, there is apprehension among traders about the Indian Rupee because of the RBI interest rate decision. A higher oil price and expectations of a dovish RBI policy will keep investors optimistic.

A Reuters poll predicts difficulties for purchasers of Indian rupees in the future.  The first hour of Tuesday’s Indian trading day saw the USD/INR currency pair fluctuate to its highest monthly levels, reaching 82.80. Thus, the Indian Rupee pair reflects the market’s cautious attitude ahead of the important events, namely a speech from Federal Reserve Chairman Jerome Powell and the Reserve Bank of India’s (RBI) announcements of its monetary policy, both of which are scheduled for publication on late Tuesday and early Wednesday, respectively.

Speaking of the two factors driving growth, US President Joe Biden and Treasury Secretary Janet Yellen put the US Dollar bulls on edge. The same combined hawkish Fed discussions provide the rates on US Treasury bonds and the US dollar a floor. In an interview with Bloomberg, Raphel Bostic, president of the Federal Reserve Bank of Atlanta, said that “the robust labour market probably indicates ‘we have to do a bit more work’.”

As a result of India’s dependence on energy imports and record deficit, rising oil prices might hurt the Indian Rupee (INR). However, WTI crude oil continues the previous day’s recovery from a two-month low, rising 0.70% intraday to $75.15.

It’s important to note that the USD/INR prices are also driven by expectations of the RBI’s dovish increase. According to Reuters, the Reserve Bank of India is expected to announce a final 25 basis point hike, to 6.50%, on Wednesday, capping off a moderate effort to raise interest rates. According to the report, the central bank’s inflation prediction and management of the government’s borrowing programme will also be closely examined. Governor Shaktikanta Das may also be questioned about the banking industry’s exposure to the troubled Adani Group.

Buyers of USD/INR are also encouraged by worries about a weaker Indian Rupee, according to a Reuters poll. Next, in the February 1 budget, 43 foreign exchange experts were polled by Reuters, and the results suggested that the rupee would rise by slightly over 1% to 81.75 to the dollar over the following six months.

The USD/INR pair purchasers seem to be challenged by concerns about a surprise action by the RBI and the recent positive budget amid a widespread decline in US Treasury bond rates and a lacklustre Asian session on Tuesday.

S&P 500 Futures post modest gains among these bets, while Australian equities post modest losses at the latest.

Fed Chair Powell’s ability to applaud the most recent positive US data may support the USD/INR bulls. Still, the RBI’s unexpected hawkish action may put the pair’s purchasers under scrutiny. The State of the Union address by US President Joe Biden will be crucial to follow (SOTU).

Technical Analysis

Before the late 2022 peak at 83.20 and the immediate USD/INR upside around 82.80, a downward-sloping trend line from October 2022 presents a barrier, but a breach won’t prevent the bulls from resetting the record high. Meanwhile, downward movements must close daily below the 82.00-area 100-DMA support to reawaken the bears in the Indian Rupee pair.