This Is USDINR spot hourly chart. The USDINR has been moving relentlessly from the lows of 53.70 in a upward sloping channel. Today it made a high of 56.765 which coincides with gap of the bearish island reversal- candlestick pattern. The hourly RSI has been showing a strong negative divergence. With the strong resistance tested and indicators showing over bought condition the rally might be over for some time now. USDINR can correct and consolidate for the strong rally of nearly a month.
It is generally termed that there is a negative correlation between currency and stock market. But it can be observed that Nifty and USDINR has been moving in tandem for past few months and only this month the inverse correlation is coming back in action.
I expect the USDINR to start moving down as also on daily chart the RSI is in overbought zone. But again the RSI can stay in this zone while USDINR consolidates weakening the resistance to start another leg up. The support for USDINR can be at 56.3275- 56.185-56. At the levels of 56 it is to be seen if it can break the upward sloping channel and start a bigger correction. The level of 56 is strong support because of the unfilled gap and multiple tops. The gap target is around 58.3725 levels.
On daily charts USDINR has formed inverted hammer which has bearish implications. The weekly charts however show strong bullish momentum.
UPDATE: 03 June 2013
USDINR had moved down in opening trades but failed to sustain at lower
levels. It moved up to test the highs friday. Now it is to be seen if
USDINR makes a new high or starts moving down. Although RBI has been
continuously stating that a level above 57 is something they a are not
comfortable with. Thus it can be expected that RBI will sell Dollars as
and when needed for atleast sometime. So lets see how things span
out.....
UPDATE: 04 June 2013
USDINR yesterday made a new high of 56.82 in spot but failed to break the high of 57.05 in the futures. Today it opened lower and moved higher. In the second half it broke down from the highs of 56.77 to the lows of 56.40. There's a gap of 2 paise at 56.395 and 56.375 which was tested today.
UPDATE: 05 June 2013
USDINR made a low of 56.31 near the strong support of the 56.3275 mentioned in the original post and bounced back. Today it made a high of 56.78 but was unable to break the high of 56.82 made on 3rd June. The hourly RSI (Relative strength index) has come back out of overbought state. So it can be expected to resume its upward rally. The bias remains negative as long as the USDINR trades below the levels of 56.77.
UPDATE: 07 June 2013
Yesterday USDINR made a low of 55.95 near the strong support of 56. Although it was not visible in the futures but it was not a freak trade either (USDINR traded for almost one minute). Even if we don't take this thing into account then USDINR opened gap up above the previous high of 56.82 and made a high of 57 near the resistance of 57.01. From there on the selling pressure brought it down to the support of 56.70.
Today it has been moving in the tight band of 56.82 and 56.70 for most of the treading session. It was only after 1.15pm (IST) that the currency moved spontaneously to the new high of 57.12. The move came after a consolidation of only 1.5 days and lasted till 1.45pm (IST). A closing above the resistance of 57.15 is very important for the currency pair to move past the all time highs of 57.3250.
Taking into consideration the volatility I feel that USDINR will take out the all time high sooner than later and then will keep consolidating in the upper range.The probable target for USDINR is around the levels of 57.56-57.93-58.93, which is the upper trend line on monthly charts as shown below:
UPDATE 11th June 2013:
USDINR had a blast yesterday with a move of 57.07 to 58.13, an all time high. This is highest single day gain for this pair. The previous high of 57.325 became a mere custom to pass and it marched ahead fast. The targets of 57.56, 57.93 were achieved yesterday itself. I was expecting it to consolidate but its in no mood to stop.
Today it achieved the target 58.93 and got sold off. The monthly resistance has finally come into play. The currency drifted to the lows of 58.2750. However the morning gap provided support and USDINR closed at 58.39. It is to be seen if todays gap acts as support or gets filled in the near future. This will help to decide the future moves of the currency pairs.
UPDATE: 12th June 2013
The gap left yesterday was filled today, confirming that it was an exhaustion gap. Also Today USDINR has formed a big black candle confirming the bearish hammer pattern. The formation of such bearish patterns in the vicinity of am important resistance indicates that the rally might be over. Thus we can now expect USDINR to drift lower to correct the up move from 53.66 to 58.95. The supports are 57.44-57.70-56.95-56.34-55.70. Any move above the highs of 58.95 will negate the pattern and will indicate that further upside is open for USDINR. However it look like a remote possibility at this juncture.
UPDATE: 17th June 2013
On friday 14th June USDINR took support at the first support and has bounced back sharply. Since making the top of 58.95, it has been drifting to the lower levels.
The entire fall till date is forming a falling wedge pattern, which has a natural tendency to give bullish breakout. However a bearish break down will fasten the fall further. The time will tell what kind of breakout USDINR gives, but I'm more in favor of bullish breakout. I expect the all time highs to be tested and it might even be surpassed before the pair actually starts correcting. In such case the fall from 58.95 to 57.45 levels will have to be taken as correction of the up move from 53.66 to 58.95. But it is too early to say anything, I'll let the market decide the breakout!
UPDATE: 18th June 2013
Yesterday I wrote about a possible up move in USDINR and here it is today morning. USDINR opened and broke out of the consolidation with a bullish breakout of falling wedge. The pattern target lies at 59.15 above the all time high of 58.95. The currency pair gave highest closing at 58.77, giving a clear bullish indication.
UPDATE: 20th June 2013
USDINR tested the previous highs of 58.95 yesterday and failed miserably. But today it broke the resistance by a gap up opening at 59.50 and moved up to the new life time high of 59.98. A new round of selling at top brought the currency pair down to the levels 59.60.
The gap left yesterday was filled today, confirming that it was an exhaustion gap. Also Today USDINR has formed a big black candle confirming the bearish hammer pattern. The formation of such bearish patterns in the vicinity of am important resistance indicates that the rally might be over. Thus we can now expect USDINR to drift lower to correct the up move from 53.66 to 58.95. The supports are 57.44-57.70-56.95-56.34-55.70. Any move above the highs of 58.95 will negate the pattern and will indicate that further upside is open for USDINR. However it look like a remote possibility at this juncture.
UPDATE: 17th June 2013
On friday 14th June USDINR took support at the first support and has bounced back sharply. Since making the top of 58.95, it has been drifting to the lower levels.
The entire fall till date is forming a falling wedge pattern, which has a natural tendency to give bullish breakout. However a bearish break down will fasten the fall further. The time will tell what kind of breakout USDINR gives, but I'm more in favor of bullish breakout. I expect the all time highs to be tested and it might even be surpassed before the pair actually starts correcting. In such case the fall from 58.95 to 57.45 levels will have to be taken as correction of the up move from 53.66 to 58.95. But it is too early to say anything, I'll let the market decide the breakout!
UPDATE: 18th June 2013
Yesterday I wrote about a possible up move in USDINR and here it is today morning. USDINR opened and broke out of the consolidation with a bullish breakout of falling wedge. The pattern target lies at 59.15 above the all time high of 58.95. The currency pair gave highest closing at 58.77, giving a clear bullish indication.
UPDATE: 20th June 2013
USDINR tested the previous highs of 58.95 yesterday and failed miserably. But today it broke the resistance by a gap up opening at 59.50 and moved up to the new life time high of 59.98. A new round of selling at top brought the currency pair down to the levels 59.60.
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