Monday, May 16, 2011

USDINR can start multi-month up move...Nifty should move down!

USDINR Weekly chart

Looking at USDINR above we can see that there can be some serious depreciation in Indian Rupee against USD. We can clearly see the Elliott wave markings on the chart and prices have formed Triple bottom at exactly 61.8% retracement of rally from 39 to 52 levels. The downward move is also overlapping and we can see a strong positive RSI divergence on weekly scale.

All this indicates USDINR should now start moving up and break the downward trendline. A break above 45.10 will provide strong confirmation that we might have ended multi-month down move on USDINR.

This also sends across bearish picture for Indian equities. We do concur that currency and equities do not move in lock step but the correlation does increases at major turning points.

Nifty 120 mins

Nifty 30 mins

We mentioned earlier that we were expecting a move near 5400 levels but that did not happen. Prices took a V turn and rallied steeply on last day of the week by crossing above our key level of 5600. But however Nifty made a high of only 5605 and moved back down immediately giving respect to this level. This movement was not anticipated by us and this is exactly the reason why we should have our Risk management levels decided before we enter the markets. There are times when we keep guessing the direction and corrections of any degrees are very difficult to predict.

We now see that wave (ii) is not yet over and is still ongoing. We now wait for 5475 level to be taken out on downside for confirmation that the down move has started. Till that happens we can see some more consolidation within the range. A clear break above 5605 will bring some more upward correction till 5640 – 5650 levels. Also the USDINR chart above conveys that Rupee might start depreciating against USD and that indicates we might start a 3rd leg down on Indian markets soon but wait for confirmation below 5475 levels!


  1. 19 may ewc:

    Just want to share my view @ NIFTY...
    Everyone is still bearish say PCR points further downside. My view was down but it after chking todays session, bought nifty with stoploss of 5400.

    If one believes in EW then wave 1 = wave 5 if w3 is extension. But i think, if w2=w1 then w5 is near equal w3 which is not the case here.

    Rest, if nifty is in wave 5 of a after X wave (double zigzag) then bounce back must come soon upto 5600-5650 (a) & then down to 5400 as b wave & then c to 5800. Afterthat big downfall to 4700.

  2. Nice...Elliot wave is still a rather unexplored technical indicator. Probably the reason why it's not used much lies in the fact that it's almost never conclusive. I would personally use EW only as a way of confirming my findings using other tools.

  3. I think you are posting it at exactly wrong time. I think you do not follow USDINR. It is now at 50. Check the charts and one tool that supported this view was Elliott. I agree there are times when we have equally probable scenarios but this does not mean it is never conclusive. We should appreciate each theory for its powers and should be aware when it is not useful. Making a claim that it is almost never conclusive is a harsh statement. I agree in case of Nifty it has been off track because corrections can continue to be complex but it says complex corrections are difficult to forecast...