USD/INR Rises as Markets Anticipate Fed Rate Decision.

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Indian Rupee Weakens Ahead of Fed Rate Decision: Key Market Insights

The Indian Rupee (INR) lost ground on Wednesday after reaching a three-week high in the previous session. Geopolitical tensions in the Middle East and the anticipation of reciprocal tariffs from the U.S. on April 2 have weighed on the INR, increasing selling pressure.

However, a weaker U.S. Dollar (USD) and strong exporter USD sales may provide support for the Indian currency. Additionally, India’s current account surplus for February could contribute to a potential INR rebound.

Federal Reserve Decision in Focus

All eyes are on the Federal Reserve’s (Fed) interest rate decision scheduled for Wednesday. While the Fed is expected to hold interest rates steady, investors will closely watch the Press Conference and Summary of Economic Projections (SEP) for clues on future rate moves and economic outlook.

Key Economic Indicators Impacting INR & USD/INR Outlook

India’s WPI Inflation: Increased to 2.38% in February from 2.31% in January, exceeding estimates of 2.36%.
U.S. Industrial Production: Jumped 0.7% MoM in February, outperforming expectations of 0.2%.
U.S. Housing Market:
- Building Permits fell 1.2%, slightly better than expectations.
- Housing Starts surged 11.2% after a sharp decline in January.
Fed Rate Cut Speculation: Market odds for a May rate cut have risen to 25% from 18% (CME FedWatch Tool).

USD/INR Technical Outlook: Bullish in the Long Term

The USD/INR pair maintains a bullish trend in the longer term, trading above the 100-day Exponential Moving Average (EMA). However, in the short term, the breakout from a symmetrical triangle and the 14-day RSI at 42.60 suggest possible downside risks.

Key Levels to Watch

📈 Resistance Levels:

87.00 (psychological level) – A breakout could push USD/INR towards 87.38 (March 11 high) and 87.53 (February 28 high).

📉 Support Levels:

86.48 (March 18 low) – A breakdown could lead to further declines towards 86.14 (January 27 low) and 85.60 (January 6 low).

Conclusion

The Indian Rupee faces short-term pressure ahead of the Fed rate decision, but market factors such as a weaker USD, export sales, and India’s current account surplus could offer some support. Traders should monitor key resistance and support levels as well as Fed policy signals for future USD/INR movements.