Saturday, July 30, 2011

$USD and Nifty

The Indian Rupee is critically poised against the US Dollar at this juncture. Also a significant event of US debt default issue is coming up next week. Let us analyze effect of USD v/s INR on Nifty and USD as an instrument.

 Below is a Long term chart of USD v/s INR marked with important Nifty Levels . It can be seen that the strengthening of Rupee leads to stronger Indian Markets whereas Strengthening of Dollar corelates with Nifty bottoms.

This corelation can be closely seen in one year chart where important Tops and Bottoms of Nifty are almost inversely corelated with the USD-INR relationship. Now the Dollar is once again poised at important support levels of the year . Any strength in Rupee now may lead to a inward flow of FII money and hence a rally in Nifty , also the opposite will hold good by downward trend continuing in case of bounce by Dollar from here.

Technically Dollar has become weak lately as evident by 50-200dma Death Cross and its trading below 50 dma.
In short term it has broken a Triangle Pattern and trading below the Lower trendline. Though the Indicators are in Oversold zone but they can trade here longer and Dollar may move further down. Alternatively there may be a bounce from here or some what lower near 70-72 levels. 

In the view of the Debt Default issue unfolding in US next week ,which may have impact on Dollar structure, the movement of USD should be watched to get the signal for Nifty's trend ahead.   


vksoni said...

thanks aarvee for usd analysis ans its impact on nifty

AAR VEE said...

Thanks VKSoni for visiting and commenting.

mridul said...

many many thanks for this usd-nifty connection as few week back i write this as only missing otherwise 100% in dealing all the aspect on nifty. and undoubtly logical and excellent analysis and now THE THIRD EYE is the only site with all aspect of nifty.nifty is up for me because dollor may weaken further even if avert the crisis ,the creadibility is lost for dollor.

AAR VEE said...


Thanks for ur thoughts.

I suppose they will artificially keep the dollar strong till Obama's relection next year.

venkatapathy l said...

Thank you sir for the very insightful analysis. This important point is not taken into account in many of the analyst's work. You have done a wonderful job.

In fact I decided to keep off the market until there emerges clarity on this account.



AAR VEE said...

Hi LV,

Thanks for your comment.

The prices have every aspect factored in. Proper hedging and following them will help to trade profitably.

Piyush Sharda said...

good one rv ,
ist thing coming to my mind is that
the crisis will be solved and then
dollar will rally and we'll fall when everyone expecting rally after
crisis solved.

AAR VEE said...

Hi Piyush,

Nice to have ur views.

Ya u may be right as technical probabilities are tilted towards a fall.

What are ur EW views now ?

Piyush Sharda said...

very confusing rv. it looks like
the b is complete for a(5944-5195) with truncated c 5532-5702. but this move 5532-5702 is looking like
3 waves so it might be part b for
a (5195-5740).

i am also thinking if frm 6338 its a flat wave i 6338-5232 ( truncated 5th) wave 3.1 5944-5195. didnt work this in detail.

AAR VEE said...

Thanks PS for giving more food for thought :))