Bullish View
- Buy the USD/INR and set a take-profit at 79.63.
- Add a stop-loss at 78.58.
- Timeline: 1-2 days.
Bearish View
- Set the sell-stop at 78.74 and a take-profit at 78.0.
- Add a stop-loss at 79.50.
The USD/INR pulled back sharply on Thursday morning as the spectacular rally faded. The pair dropped to a low of 78.53, which was lower than this week’s high of 79.32. It is still remarkably higher than where it started the year at.
US Jobs Data Ahead
The Indian rupee has been in a strong sell-off against the US dollar as investors have embraced a more risk-off sentiment. They have favored moving to the relatively safer US dollar as risks of a recession rise amid the extremely hawkish Federal Reserve.
On Wednesday, minutes by the Federal Reserve showed that the bank was committed to continuing hiking interest rates in the coming months. Only one member of the committee - Esther George - opposed the giant 0.75% rate hike that happened in June.
The minutes also revealed that members were optimistic that they will implement another 0.75% or 0.50% rate hike in the coming meeting. All these actions, together with the performance of commodities, have increased the possibility of a recession. As a result, investors have moved to the safety of the US dollar.
The next key catalyst for the USD/INR price will be the upcoming US non-farm payroll (NFP) data that will come out on Friday. Analysts expect the data will show that the economy created more than 200k jobs in June while the unemployment rate remained at about 3.5%.
The pair will likely react mildly to estimates by ADP that will be published on Thursday. Historically, ADP numbers tend to have a significant divergence from the official ones. The US will also publish the latest export and trade numbers.
There is no scheduled economic data from India on Thursday and Friday and the next meeting by the RBI will be in August. Therefore, the USD/INR price will mostly be influenced by the US dollar.
USD/INR Forecast
The four-hour chart shows that the USD/INR pair has been in a strong bullish trend in the past few months as the rupee crashes. The pair is trading at 79, which is slightly below this week’s high of 79.33. In most periods, financial assets tend to consolidate or have a pullback as they near a key resistance level.
The pair is still above the 50-period moving average while the MACD has moved made a bearish divergence pattern. Therefore, the outlook is still bullish, with the next key price target being the second resistance of the standard pivot point at 79.64.
