The USD/INR currency pair remains in corrective mode, trading lower from the 86.00 high hit last week. Market analysts are forecasting the pair to continue its move lower to a key support level between 85.25 and 85.35. This support address corresponds with the lows on May 28, May 30, and June 2. It further coincides with a rising trendline that has held since the beginning of May.
The US Dollar Index has now made a four-day reversal from the 86.00 level. Traders have their eye on what possible results might come from this movement. A close above this major level indicates a trend reversal. After all, it points us in the direction of the April 9 peak of 86.90. On the flip side, loss of momentum could lead to a pulling back to less supportive levels.
Market Trends and Influences
The Indian Rupee’s (INR) distinct sensitivity to macroeconomic cues from abroad illustrates this very well. Observers point out that the INR was up for five straight days as of Wednesday. However, caution remains among traders as they look ahead to key high-impact US Consumer Price Index (CPI) inflation data.
Market analysts unanimously agree that increasing inflationary pressures in the US would damage the INR. This effect would be magnified if US inflation runs higher than what India’s peers experience. The current market sentiment is further influenced by a tepid reaction to the recent US-China deal, which has left investors cautious.
“US CPI data expected to show May inflation increase amid looming Trump’s tariffs impact.”
The speculation surrounding inflation data is acute as one of the largest factors that drives currency valuations. Outlook on INR-positive drivers Higher interest rates, especially real interest rates (the nominal rate less inflation) are long-term INR supportive as they entice carry trades. Additionally, a strong growth rate will attract foreign investments, creating more demand for the Indian currency.
Technical Analysis of USD/INR
The full technical picture for USD/INR shows an overall bullish ascending triangle pattern. This bullish formation usually precedes big upward momentum in this market. With major support zone coming up at 85.25-85.35, the durability of this up move looks questionable.
An affirmation underneath this support zone may increase bearish pressure on the pair. That could pull the price back down to the May 26 and 27 lows at 84.77 before eventually going for the May 12 low at 84.25. On the technical front, traders are advised to be watchful; these levels may set the tone for the future direction of USD/INR.
In the last few trading sessions, USD/INR has become a market indicator driven by macroeconomic factors and market sentiment. Simultaneously, the dollar’s significant weakening against all major currencies has increased the upward pressure on its value against the INR itself.