USD/INR ANALYSIS
- India’s 2021 growth outlook revised to 11.5% by IMF
- Vaccine rollout program requires additional buy-in from public
- U.S. Dollar influence remains critical to USD/INR
FUNDAMENTAL BACKDROP
Yesterday, the IMF projected India as the only major economy with double digit growth in 2021 which puts the Asian powerhouse on track toward the ‘$5 trillion economy’ status. Lockdown measures implemented by Indian government were viewed positively by the IMF as a better than expected economic recovery ensued after the lockdown period.
This reflected well today with the Indian Rupee appreciating 0.14% against the greenback (at the time of writing). Analysts and economists alike are now favoring a V-shaped recovery for the emerging market which could bode well for the local currency going forward.
Indian GDP vs USD/INR:
Chart prepared by Warren Venketas,Refinitiv
U.S. INTEREST RATE DECISION AND STIMULUS PACKAGE
FOMC guidance given in December’s meeting will likely continue today as Federal Reserve Chair Jerome Powell is due to address the public after the two-day policy meeting. Persisting with interest rates near zero along with a continuation of the bond buying initiative ($120 million monthly) is expected. Until such time as an improvement in employment and inflation data is seen, the FOMC will presumably continue with the current policy approach. This dovish stance could lead to further downside on the USD/INR pair due to Dollar weakness.
PUBLIC HESITANCY FACING INDIA’S VACCINE DISTRIBUTION PLAN
The worlds largest inoculation strategy is underway but many frontline workers are cautious around the safety of the vaccines. This could prolong India’s plan to vaccinate approximately 300 million people by July 2021 and reduce vaccine optimism which could hamper economic growth projections.
USD/INR TECHNICAL ANALYSIS
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Feb 02
( 13:02 GMT )
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Trading Price Action
USD/INR Daily Chart:
Chart prepared by Warren Venketas, IG
Previous support target (73.139) was breached as mentioned in my previous article which further emphasizes the 50% Fibonacci level. The steeper downtrend (dashed black line) has now established itself with multiple daily candles serving as confirmation. With the U.S. Dollar heavily influencing price action on EMs including the Indian Rupee, short-term volatility is expected with several high impact…
Read More: Indian Rupee Robust After IMF Double Digit Growth Forecast