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• The USD/INR pair reacted mildly to Friday’s RBI interest rate decision.
• The bank left interest rates unchanged at 6.50% as expected.
• The US will publish non-farm payrolls (NFP) data on Friday.

The USD/INR exchange rate remained in a consolidation phase on Friday after the Reserve Bank of India (RBI) delivered its March interest rate decision. The pair was trading at 83.40 on Friday, where it has been in the past few days as focus shifts to the upcoming US nonfarm payrolls (NFP) data.

US NFP data and RBI decision

The USD/INR pair moved sideways after the RBI left rates unchanged as most analysts were expecting. It has left them at 6.50% in the past eight straight meetings as it focuses on the performance of India’s economy.

The bank believes that restrictive interest rates are needed to help push inflation lower. The most recent data showed that the country’s inflation has stabilised at the 5% level. This rate is lower than last year’s high of 7.44%.

Further, the Indian economy is still doing well as more foreign companies make investments in the country. Just this week, it was reported that Tesla (TSLA) was scouting locations for its plant in the country. 

Economists believe that the RBI is waiting for the Fed to start cutting interest rates before it follows suit. In a note, an analyst told Reuters:

“The down move on rates will happen once there is further clarity on three things: monsoon forecasts by way of spatial and temporal distribution, presentation of the final budget and a definitive move from the Fed.”

Economists have mixed opinions on when the Federal Reserve will start cutting interest rates. Some analysts believe that the bank will start in June while others see no need at all since inflation is still high. Raphael Bostic, a Fed member, said that the first rate cut should happen in Q4.

Looking ahead, the USD/INR exchange rate will react to the next US nonfarm payrolls (NFP) data. Economists polled by Reuters believe that the American economy created 212k jobs in March after adding 275k in the previous month. 

They also expect the data to reveal that the unemployment rate remained at 3.9% while the average hourly earnings rose by 4.1%. A strong NFP report will give the Fed more room to maintain its restrictive policy.

USD/INR technical analysis

USD/INR chart by TradingView

The USD to INR exchange rate has remained in a tight range since August last year. It has remained between the support at 83 and the resistance point at 83.70 in this period. The pair is slightly above the 50-day and 25-day moving averages.

It is also sitting at the important resistance at 83.40, where it failed to move at several times since August. The pair has formed an ascending triangle pattern, which is usually a bullish sign.

Therefore, the outlook for the USD/INR exchange is neutral for now. The key prices to watch will be the support at 83 and the resistance point at 83.70.

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