Currency market update: USD trading stable ahead of the FED meeting

With Fed projected to raise interest rates by 25 basis points for the first time since 2018, the currency remains relatively steady before the announcement. Continue reading to learn more.

On Wednesday, the Indian rupee opened higher as risk assets dominated, the dollar remained stable, and crude oil prices fell. It did, however, come close to its four-day low. Because the Fed is expected to raise interest rates by 25 basis points, the attention will be on the Federal Reserve's remarks and the outcomes of the meeting on Wednesday. If the Fed raises interest rates, it will be the first time since 2018 that the US has seen a rise in interest rates. Due to strong inflation, interest rates might be raised.

On Wednesday, the spot USD/INR pair attempted to rise but failed due to selling pressure at 76.29 levels. Technically, the USD/INR pair's support and resistance levels are 76.02 and 76.33, respectively.

On Wednesday, the dollar remained flat around the 99 level, ahead of the expected 25 basis point rate rise. The US report, on the other hand, showed that Producer Price Inflation was 10 per cent, underlining inflationary pressures.

Although recent losses for West Texas Intermediate crude were reduced, the price remained below USD 100 per barrel. Having said that, there are hints of increased supply as Iran's nuclear talks continue. However, Covid induced lockdowns in China may reduce demand.

Even if Russia began paying interest of USD 117 million on Wednesday, there is a substantial risk of default since sanctions and Russian decrees may block dollar settlements.

Following the recent gain, the USD/INR pair's March futures created another Doji candlestick pattern on the daily chart, indicating uncertainty among bulls and bears. This implied that the consolidation will continue.

However, based on the moving averages, the pair has been trading above the short-term moving averages. In terms of indicators, the Relative Strength Index is at 63 and appears to be flattening, indicating slow momentum.