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.