USD/INR holds positive ground above the 82.70 area, RBI policy meeting, inflation data eyed

• USD/INR posts a modest gain around 82.70 ahead of the key event.
• The Reserve Bank of India (RBI) is expected to hold the key interest rate at 6.50%.
• The US Nonfarm Payrolls report showed that the US economy added 187,000 jobs in July.
• Investors focus on the RBI policy meeting, the Indian CPI Industrial Production.

The USD/INR pair posts a modest gain after retreating from multi-month highs of 81.90 during the early Asian session on Monday. The pair currently trades within a large consolidation phase since October 2022 and holds above 82.70, up 0.06% for the day. Meanwhile, the US dollar Index (DXY), a measure of the value of USD against a basket of six influential currencies, consolidates its recent loss near 102.08.

The Reserve Bank of India (RBI) is widely anticipated to hold the key interest rate at 6.5% for the third consecutive time at its upcoming monetary policy meeting scheduled for Thursday.

According to a Reuters poll, the market anticipates that the Indian Rupee (INR) is likely to move in a narrow range for the next three months as the Reserve Bank of India (RBI) utilises its enormous foreign exchange reserves to keep the currency steady. That said, the possibility that the RBI could periodically intervene to prevent the rupee from falling further might cap the upside for the USD/INR pair.

On the US dollar front, the US Nonfarm Payrolls report showed that the US economy added 187,000 jobs in July. The June figures were revised lower to 185,000. Meanwhile, the Unemployment Rate decreased to 3.5% from 3.6%, and Average Hourly Earnings came in at 4.4%, surpassing the market's forecast of 4.2%.

Market participants will closely watch the RBI monetary policy meeting scheduled for Tuesday to Thursday, and the policy decision will be announced on Thursday. Also, the Indian Consumer Price Index (CPI) for July and Industrial Production for June will be released on Friday. This event could significantly impact the Indian Rupee and provide a clear direction for the pair. On the US docket, the US Consumer Price Index (CPI) for July and the Produce Price Index (PPI) will be due later this week. Market players anticipate a 0.2% monthly increase in US CPI.

USD/INR Technical Outlook:

From the technical perspective, two converging trend lines constitute the formation of a symmetrical triangle pattern on the daily chart. The Relative Strength Index (RSI) holds above 50, and the Moving Average Convergence/Divergence (MACD) stands in bullish territory, supporting the buyers for now.

Resistance levels: 83.00, 83.20, and 83.40.

Support levels: 82.40, 82.20, 81.90 and 81.65. 

USD/INR daily chart