The fast upwards trend in the USD/INR continued into mid-January, when suddenly resistance started to prove durable and it became clear the Reserve Bank of India showed a desire to control values.
The USD/INR is around the 86.5600 vicinity as of this writing. On the 13th of January the USD/INR was near the 86.7000 region. On the 3rd of January the USD/INR was valued close to 85.8650. The ability of the USD/INR to move upwards with bullish strength since the last week of November has been easy to visualize with technical charts.
While other major currencies have also lost value to the USD over the past handful of months, the trading in the USD/INR has provoked comments because it is known the Reserve Bank of India tightly controls the price of the exchange rate. The Reserve Bank of India does not like speculation in the USD/INR to be done by the public. There are various opinions regarding the RBI’s transparency regarding its monetary policy, but it is seen as rather friendly towards large businesses with global considerations regarding outlook on interest rates and foreign cash holdings.
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Velocity in the USD/INR Runs into a Wall
The weakness of other major currencies and the drop in value to the Indian Rupee did correlate in some degrees until the middle of January. But suddenly the upwards velocity in the USD/INR did run into a concrete wall and the move higher stopped in its tracks. The Reserve Bank of India clearly entered the market and began to create resistance. The USD/INR for the past two and a half weeks has seen steady resistance near the 86.6000 vicinity with infrequent outliers.
The bids and asks in the USD/INR which are available to large players are wide, and for retail traders pursuing the currency pair on brokerage platforms this can lead to dangerous bets. Retail speculators need to use entry price orders and it may take patience to get a fill and have the trade become active. In order to cash out of a trade when tight conditions are being seen in the USD/INR a take profit order is certainly needed with a strict price mandate too.
February after Price Storms of December and January
For the moment it appears the USD/INR has entered a tranquil phase. The threat of domestic inflation and foreign cash reserves in India seems to have been a catalyst for the Reserve Bank of India to become active regarding its monetary actions the past week and a half. The RBI’s cash reserve rhetoric and stated interest rate policy objectives to combat inflation look to have calmed the waters for the moment.
- While the USD/INR certainly moved in a bullish fashion in December and January and with faster upwards price action, things have slowed again.
- The USD/INR remains liable to produce additional volatility however.
- The current calm seen the past two weeks will likely see additional tranquility with perhaps a slow moving incremental move higher, but traders should not get too comfortable.
USD/INR Outlook for February 2025
Speculative price range for USD/INR is 86.3500 to 86.8500
The return of quiet trading to the USD/INR the past two weeks is of interest and a signal that the RBI is using a firm grip on the exchange rate. The currency pair is certainly still within the higher elements of its long-term price values and this is unlikely to change in February. If price velocity remains slow, then traders may have to get use to the notion that methodical incremental moves are dominating again.
The 86.6000 level for the moment should be watched. If this mark is suddenly toppled and values are sustained above, the 86.7000 level would need monitoring. Having touched highs in the middle of January the USD/INR has traversed a rather tight range the past two and half weeks, it may continue to do so. Looking for upside in the USD/INR may be correct, but it is unlikely to happen with the same velocity which occurred in the two previous months.
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