After an exciting week, the USDINR spot still remains elevated as the Federal Reserve has encouraged the market participants to price in more rate hikes into next year. After the hawkish Fed policy, there has been an abrupt end to the low volatility and range-bound Currency Trading. The USDINR spot has surged by nearly 2% since the beginning of this month breaching the psychological level of 74 with the USDINR 1-month ATM volatility being surged to 5.5% from an average of 4.5% observed since mid-May.
This is a quiet week on the economic calendar, with a focus on the flash PMI data from the US and Europe. While, the US Fed officials like Bullard, Kaplan and John Williams (NYSE:WMB) are due to make public appearances. The focus will be on their ability to alter the Currency Trading market through their commentary on the US economy, especially after the two rate hikes have been pencilled in by the end of 2023. Also, Fed Powell is scheduled to testify before Congress on Tuesday. Again a hawkish reiteration will keep the dollar rally intact but dovish-leaning by either Powell or John Williams might undermine recent dollar strength by talking down taper risk.
The focus will also be on the Bank of England policy due on Thursday, followed by US personal income and spending data on Friday. The PCE high-impact data, another reading on US inflation will stand to weigh on broader market sentiment due to its potential to further sway the threat of Fed tapering.
As seen in the USDINR chart, the pair broke out above its Currency Trading range and the pair closed at 73.86 levels last week. The outlook for the current week will stay positive until the pair trades above 73.80 levels on dips. The pair will extend the current upswing towards the next resistance areas between 74.50-74.75 areas until support holds. A decisive break below 73.80 will see the pair correct towards 73.55-73.40 levels again. A weekly close below 73.40 will be negative for the pair and prices will correct towards 73-72.80 areas in that case.
Published in Investing.com