Many are reading the news that how USDINR is crossing life time high levels of above 69. This simply shows news follow the movement of markets and not the other way around. After the move has happened many will try to find out reasons for the move which is useless information for a trader.
In the previous article we have predicted movement of currency: USDINR – Brilliant prediction using Elliott – Neo wave forecasting!
Understanding the relationship between Indian Equity index – Nifty and Currency market – Indian Rupee
USDINR and Nifty daily chart
By just looking at the bigger trend it might seem there is no correlation as such between Equity and currency markets. However, if you look at the charts a little more closely one can see that both these asset classes showed reversal on the same day on most of the occasions and at times within the same hour as well.
In the above chart, USDINR is marked in red and Nifty chart is in black. The arrow shows that reversal in Nifty on upside is associated with reversal in USDINR on downside (i.e. INR appreciated against USD) atleast for temporary period. So the correlation at major turning areas between both these assets is high although the magnitude of correlation might be different.
The major correction in Nifty that started post Financial crisis in 2008 got completed in March 2009. The same day we can see that USDINR formed an important high. INR started appreciating post that until end of 2010.
Another very important observation is that Nifty formed a low in August 2013 and on same day USDINR formed a high near 69 levels. This was a very important turning areas for both the assets. We have seen sharp appreciation both on Nifty and USDINR post that.
If you look at the last two highs made on USDINR they also coincided with the important lows on Nifty which was in March and December 2016.
Most importantly, the sharp correction in equity markets seen in February 2018 was also accompanied by sharp rise in USDINR from near 63 levels to now at 69. Even though Nifty has shown recovery from the lows the currency still continues to trade near 68 – 69 zone.
The above observations simply show that during important junctures both INR and Nifty reversed together and later they moved independently. So it is very important to keep a track on both the assets to get a confirmation if an important tops or lows are being formed. Detailed statistical analysis can also provide valuable insight that might help to capture the reversal prudently….
These are a few very different way of looking at different asset class. However, each asset has its independent Elliott – Neo wave counts. Once you know the pattern, you can take systematic bet with prudent stoploss and target levels. Attend the two days’ workshop on How to trade from 5 minutes chart to hourly and daily and identify trade setups for stocks, commodities and much more. Sessions will be held on 21st and 22nd July 2018 in Mumbai and only limited seats are available. Also get access to free video links and learn how accurately one can forecast using Elliott – Neo wave and Hurst’s Time cycles. Register here or Contact us on +91 9920422202 or write to us at firstname.lastname@example.org