Rupee
Technical Report
Current Spot Quote: 61.50
View: Bearish (On rupee)
Target: 66.50
Time-frame: By Feb 2015
Strategy:
Create longs between 61-61.50 with a Stop loss of 57.8 for 66.50(Spot
levels)
Rational
Currency
Chart
As can be seen from the Charts USD-INR has
a Strong support placed at 60.50 levels with other crucial trend line support
placed at 61/61.2 levels. Just on a Standalone basis by looking at the charts,
we feel USD-INR Pair would have probably bottomed and any dips could be used an
opportunity to buy .
Inter-market
Analysis
Over a period of time emphasis in the
Technical world has shifted from Single Market work to a more intermarket
approach. In an increasingly interrelated financial world, the ability to study
all markets gives Technical Analysts a huge advantage. No markets move in
isolation and analysis of one market should include all the others. The four
major groups are stocks, bonds, commodities and currencies, of which, Dollar
and commodities trend in opposite directions. We believe falling commodities
especially Gold and Crude will continue to have positive effect on USD.
Gold has recently given a breakdown from
Descending triangle continuation pattern and could further fall to lower
levels. Given this context, it is likely that Dollar will strengthen further
across other global currencies.
Significant
underperformance of INR Vis-a-Vis Equities
We have seen nifty rallying close to 8-10%
from the lows of 7700-7750 created on 17th Oct. However currency after
turning volatile initially has been at the same levels of 61.5-62 levels. We believe this trend is likely to continue
till Nifty rallies and a rising Nifty will have minimal impact on the rupee.
However once nifty starts correcting Rupee could also tumble. A closer look at
the historical Seasonality pattern of Nifty reveals that Nifty has a seasonal
tendency of topping out or atleast witnessing a sizable correction in the first
quarter of every year especially January and February. Incase the event repeats
and unfolds itself with Nifty Correcting in January and/or February we may see
accelerated fall in rupee which could take rupee to 66-67 levels.
Dollar
Index Chart
We have seen dollar Index Giving breakout
out from “Complex Inverse Head and Shoulder Pattern”. A complex Inverse Head
and Shoulder pattern is a variance of standard “Inverse Head and Shoulder
Pattern” in which we could have 2 Heads and/or numerous shoulders. However the
trading psychology remains the same. The 2 heads on the charts as can be seen
by “H” can also be taken as a “Double Bottom formation”. Irrespectively of
which ever Chart pattern we take, the view on Dollar Index remains upbeat .
Inflation
Rate Differentials and Interest Rate Parity
Inflation Rate Differentials and purchasing
power Parity forecasts that the exchange rate will change to offset price
changes due to inflation. For example if prices in India (Inflation) will
increase by 8% and prices in US (Inflation) will increase by 2%, the Inflation
differentials between the two countries would be (8%-2%= 6%). This means that
prices in India are expected to rise faster relative to prices in USA. In this
situation, the purchasing Power Parity approach would forecast that the INR
would have to depreciate by approximately 6% to keep prices between both
countries relatively equal.
Interest rate Parity is a theory which
states that the interest rate differential between two countries is equal to
the differential between the foreign exchange rate and the spot exchange rate.
Interest rate parity plays an essential role in foreign exchange markets,
connecting interest rates, spot exchange rates and foreign exchange rates.
With Key Interest rates and Inflation still
significantly higher in India than the US, We believe rupee will at least not
rally here on and could even probably meet the targets of 66-77 as mentioned in
this report.
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ReplyDeleteSupport for CURRENCY USDINR Support is seen at 63.9500, 63.8000 and 63.7000 levels
While resistance is seen 64.1500, 64.3000 and 64.4000 levels.
Support for CURRENCY EURINR Support is seen at 78.0000, 77.9000 and 77.8000 levels
While resistance is seen at 78.3000, 78.4000 and 78.5000 levels.
Support for CURRENCY GBPINR Support is seen at 99.4000, 99.3000 and 99.2000 levels
While resistance is seen at 99.7000, 99.8000 and 99.9000 levels.
Support for CURRENCY JPYINR Support is seen at 53.1000, 53.0000 and 52.9000 levels
While resistance is seen at 53.4000, 53.5000 and 53.6000 levels.
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