- The US dollar has fallen a bit against the Indian rupee during the trading session on Wednesday as we head toward the FOMC interest rate decision, statement, and the all-important FOMC press conference.
- At this point, breaking below the ₹88 level is a negative turn of events, and I think it could have people dropping the US dollar from here.
- That being said though, keep in mind that the tone of the FOMC will be influential as to where the US dollar goes next.
Rate Cuts
While it is anticipated that the United States might cut rates 3 times between now and the end of the year, quite often that ends up being the bottom for the US dollar. The Indian rupee has been pounded for some time, so it may have a little bit of a “give back” in-store, but the reality is that if the United States starts to slow down, it will have an outside effect on emerging markets like India. After all, the United States is where most things end up, and if Europe suffers the effects of a US slowdown, that rapidly starts to whittle down a lot of what India can export.
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Furthermore, if there is a hint of panic coming out of the Federal Reserve, money may very well fly into the US Treasury markets, which of course will demand US dollars. Emerging market currencies like the Indian rupee will stand very little chance, and at this point in time despite the fact that the US dollar has fallen from the highs and ₹88.50, the reality is that it has still been in a very long-term uptrend, and we have plenty of support levels underneath that could continue to be influential as to where we go next. The 50 Day EMA is at the ₹87.42 level and rising, and then if we break down below there, we could challenge the ₹87 level. It’s not until we break down below the ₹87 level that we have a “lower low.”
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