USD/INR Forecast: February 2023

The USD/INR delivered a solid reversal lower in January after all-time highs were flirted with again in December, giving bearish speculators a reason to cheer.

The USD/INR delivered a solid reversal lower in January after all-time highs were flirted with again in December, giving bearish speculators a reason to cheer.

The USD/INR is trading near the 81.4700 ratio as of this writing.  After spending the month of December near apex highs and coming within sight of the 83.0000 juncture, the USD/INR took a decidedly lower turn in the month of January. Starting the month near record highs too, the currency pair hit a depth below the 80.8350 ratio on Monday the 23rd of January.

There has been a reversal higher of the USD/INR since moving to its lows early last week, but the move upwards which then came close to 81.7600 the very next day has shown the ability to limit choppiness.  After starting January with highs and challenging lows not seen since the 1st of December, the USD/INR may be on the way to creating a new trading range for consideration.

The past week of trading has seen a price range between 81.3000 and 81.68 with a few outliers. The USD/INR has produced plenty of volatility since the last week of September 2022 when it began to rush higher, but perhaps the Forex pair has now entered a more tranquil phase as financial houses come to grips with the possibility the U.S Federal Reserve may in fact have to become less aggressive regarding interest rate policy, and domestic spending issues in India become calmer.

U.S Federal Reserve Monetary Policy will Affect the USD/INR this Week

The USD/INR appeared to have been overbought in December and speculators who wagered on downside price action developing may have been rewarded with profits. Breaking below the 81.0000 price level may have signaled the selling action was overdone early last week. However, the ability of the USD/INR to settle into a rather comfortable range the past week after strong price velocity, could give bearish speculators a reason to look at the currency pair for more potential moves lower.

  • This coming Wednesday the U.S Federal Reserve is expected to raise interest rates by another 0.25%. However, it is the U.S central bank rhetoric regarding future policy that will stir Forex, including the USD/INR.
  • If the U.S Fed signals a more dovish stance regarding interest rate hikes over the mid-term, this could cause the USD/INR to experience more selling.

The Move Lower for the USD/INR in January Correlated to the Broad Forex Market

The USD/INR was able to trade lower and is now within a price range that is not within the highest realms of its mid-term values, and traders have new considerations to make.  The USD/INR struggled for months to correlate to the broad Forex market, and in October and December of 2022 saw plenty of bullish activity which went against the general trend of many major currencies teamed against the USD. The ability of the USD/INR to spark a selloff in January finally started to mirror price action of other major currency pairs. Now the question is if the USD/INR has further room to explore lower.

USD/INR Outlook for February 2023

Speculative price range for USD/INR is 80.4400 to 82.2600

Wednesday’s U.S Federal Reserve Monetary Policy Statement will influence the USD/INR. It is possible the USD/INR has been sold off based on the belief the U.S central bank will become less aggressive already. Speculators need to monitor the price action before the U.S Fed makes its outlook public and then watch the reaction in the hours following the announcement.

If support levels see a challenge and the 81.2000 level sees sustained trading below, this could indicate the USD/INR may again flirt with the 81.0000 ratio. Having touched a low of nearly 80.8330 last week will put a target on lower values by bearish speculators, but risk taking tactics should be used wisely and not be overly ambitious.

Traders who do not believe the USD/INR has the ability to trade below the 81.0000 level in the coming month should reconsider and take a look at values displayed in early November of 2022, and also look at price action before the last week of September 2022. Certainly the USD/INR can go up in value. Resistance however looks like it may prove rather durable slightly above the 82.0000 juncture. If the 81.8000 sees trading above this ratio in a sustained manner it may be a bullish signal. However, trading above this level could prove to be a short-term act of volatility until the USD/INR moves lower again.

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Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.