- USD/INR pulls back from multi-month high as traders turn nervous ahead of RBI.
- RBI is mostly anticipated to announce fourth consecutive rate cut.
Having failed to sustain more than the five-month top, the USD/INR pair remains on a back foot while trading near 70.94 before European traders arrive on Wednesday.
In addition to the US Dollar (USD) pullback, mainly due to fresh risk-off, traders’ caution ahead of the Reserve Bank of India’s (RBI) monetary policy meeting also plays its role in limiting the pair’s moves.
Even if three consecutive rate cuts have infused enough liquidity into the Indian economy, the central bank is widely anticipated to announce the fourth cut of 0.25% to the headline rates, namely the Repo and Reverse Repo Rates. The reason could be a lesser change to the lending rates and declining bond yields.
On the other hand, the USD has multiple catalysts, led by a trade war with China, which drag the greenback to the south. Recently, China kept weakening its domestic currency and escalated tensions with the US.
As far as the bond yields are concerned, both the US and Indian 10-year treasuries offer the lowest numbers since late 2016.
Should the RBI refrain from additional rate cuts by announcing qualitative measures to push the policy actions toward the final customer, the pair is expected to liquidate its latest gains.
Technical Analysis
Price pullback joins overbought levels of 14-day relative strength index (RSI), which in turn increases the odds for the quote’s further declines to 200-day moving average (DMA) level of 70.14 with a recent low near 70.47 being an intermediate halt. Meanwhile, pair’s upside break of 71.53 can escalate its run-up in the direction to yearly high surrounding 71.91.
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