• USD/INR breaches key short-term hurdle during 3-day warm-up period, refreshes 2-week high.
• RBI keeps policy rates unchanged, cites supply constraints.
• Market sentiment remains gloomy as traders await US CPI for January amid mixed concerns over March rate hikes.

USD/INR resumes offers to refresh its fortnightly high around 75.01, up 0.33% intraday following the inaction of the RBI on Thursday morning. In doing so, the Indian Rupee (INR) pair also justifies the market’s risk-averse mood ahead of the key US Consumer Price Index (CPI) data for January.

The Reserve Bank of India (RBI) is keeping the benchmark interest rate (Repo) unchanged at 4.0% while keeping the Reverse Repo rate intact at 3.55% at the end of the last monetary policy meeting.

While conveying the monetary policy decisions, RBI Governor Shaktikanta Das quotes the International Monetary Fund (IMF) statement suggesting that India is poised to grow at the fastest rate among global economies. The RBI chief also said: “Supply chain disruptions persist.”

“Headline inflation is expected to peak in the fourth quarter, with real GDP growth forecast at 7.8% for 2022/23,” RBI’s Das added.

Apart from the RBI verdict and inflation fears, the sour sentiment in the market is also propelling USD/INR prices.

Risk appetite remains low amid fears over the Fed’s next move in March, given high inflation and supply chain disruptions. On Wednesday, the White House (WH) signaled its expectation of a higher annual inflation figure while saying, “Its irrelevant month-by-month number will continue to fall for the rest of the year.” Afterwards, WH economic adviser Brian Deese said he had reason to believe the inflation-boosting factors would moderate over time.

Additionally, Cleveland Fed Chair Loretta Mester supported the March rate hike while Atlanta Federal Reserve Chair Raphael Bostic told CNBC on Wednesday that he hoped they would start. see a drop in inflation. The Fed’s Bostic also said, “Leaning toward the need for a fourth interest rate hike in 2022.”

Going forward, USD/INR moves should be driven by US inflation data for January, expected at 7.3% YoY vs. 7.3% previously. Given the higher hopes, any disappointment can easily push the price of the pair back.

Read: US Inflation Snapshot: Core CPI Above 6% May Trigger Next Dollar Recovery

Technical analysis

A daily close beyond the convergence of the two-month-old descending trend line and the 50-DMA near 74.90 becomes necessary for USD/INR bulls to hold the reins. However, the pair needs to conquer the 21-DMA level of 74.65 to regain control.

Meanwhile, USD/INR bulls need to be validated from the 75.00 level, even after breaking through the 74.90 mark, to target the January peak at 75.35.