USD/INR Forecast: June 2023

The USD/INR has seen a dramatic increase in value during the month of May and the reversal higher has occurred as behavioral sentiment in Forex has shifted again.

The USD/INR began the month of May near important lower depths, this as it seemingly traded below the 82.0000 price in a comfortable manner during the first week of the month.  However shifting behavioral sentiment in the broad Forex markets began during the second week of May. The USD/INR has mirrored the broad markets and witnessed a vast amount of strength in the USD reemerge. The sudden highs being made by the USD/INR are once again near apex values the currency pair touched late last year and the first few months of 2023.

Certainly many financial institutions started to believe the U.S Federal Reserve was going to have to become more dovish towards the end of 2023. This expectation helped the USD/INR fight off of its all-time highs and start to trade lower. As May begun there was an expectation this might continue to be demonstrated and lower values could be seen. In the matter of only a few weeks however, circumstances have changed.

The USD/INR like many other major currency pairs started to see price velocity increase on the 9^th of May and become volatile. Evidence from U.S economic data made it clear that inflation was not going to disappear quickly, and the Federal Reserve let it be known they remained concerned about the higher prices remaining stubborn. Incrementally the USD/INR climbed and by the 19^th of May the currency pair was near the 82.7600 vicinity. As of this writing the USD/INR is near the 82.6800 realm, depending on the spread regarding the ‘bid and ask’ of the currency pair.

Traders of the USD/INR have complicated dynamics to consider regarding price action. It is clear the USD/INR has reacted to stronger buying and began to challenge important resistance above, which seemingly has created a push back the past ten trading days when it has come within sight of highs around the 82.7800 to 82.8000 ratios. There are whispers that the Reserve Bank of India may be protecting the Rupee with interventions to try and guard against a loss of value via the USD/INR that would be profound. Inflation in India remains a concern.

• The U.S Federal Reserve will make their interest rate pronouncement on the 14^th of June, it seems like most global financial institutions have priced in an expected rate hike.
• Additional nervousness is being created by the fear the U.S Federal Reserve may remain hawkish over the mid-term and continue to raise its Federal Funds Rate.

Speculating in the USD/INR is difficult because it has a limited amount of volume and the mechanics of the currency pair are often affected by central bank actions.  Day traders should not be overly ambitious regarding their price targets and use solid risk management if they want to speculate on the USD/INR. While price momentum higher is a temptation to wager on, looking for prices that are far away and holding onto a position is not easy because of transaction costs including overnight fees. Traders should focus on quick hitting results if they do not have deep pockets and the use of leverage should be conservative.

Speculative price range for USD/INR is 82.4100 to 83.1400

If the U.S Federal Reserve does raise interest rates again on the 14^th of June, this may not stir the USD/INR upwards because it has already been digested into the currency pair. However, if the U.S Fed suggests via its rhetoric, that it anticipates the potential for additional increases to the key borrowing rate this could set off fireworks in the middle of June. The question is how the Reserve Bank of India will interact with a potentially aggressive sounding U.S Federal Reserve. The 83.0000 realm may look like a new shining target for bullish traders, but caution is advised for day traders.

The ability of the USD/INR to maintain its current apex highs and stay within striking distant of them is alluring and creates a sense the currency pair could climb higher in June. However, traders must remember like the surprises delivered in May, that additional economic impetus may occur over the next four weeks too, which could change the dynamic of the USD/INR. Having experienced a fast month of trading in May, the month of June could be volatile as speculators and financial houses react to what takes place. Traders certainly want clarity regarding U.S Federal Reserve policy. However, the Fed may remain rather vague regarding its monetary outlook on the 14^th of June, and this could cause violent reactions again in the USD/INR.

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