Sunday, January 29, 2012

An attempt at USDINR long term Elliott Wave analysis !

This is my attempt at long term analysis of USDINR. 
Looking at the bullish picture that is emerging in Indian equities, I have labelled two scenarios one which is ultra bullish for INR and another where the rally in INR will be limited to 44 - 42 range.
Case I : USDINR completed an impulse in 2002, and since then we are forming a huge 'irregular flat' pattern, the waves (A) and (B) are done, and now we are embarking on wave (C) of that correction which should be especially severe on Dollar against the Rupee. Rupee will stage a big rally and may target the price area around 34 - 33 range. This may sound a bit audacious at this juncture but  one must be mindful of the fact that Elliott waves are fractal in nature, and play out in the same manner no mater what the time frame under consideration.
Case II : This alternate scenario is marked with wave labels followed by a question mark, but I am not sure of the probabilities associated with these count, so at this stage I am considering both of them equiprobable. Now as per our alternate count, what ended in 2002 was actually the wave (III) of this big rally in USDINR, and we completed wave (IV) in 2008, what occurred during 2008 - 2009 was wave {I} of the wave (V) of this big impulse wave. Following wave {I} we formed waves A and C of an irregular flat correction, and are now falling in wave C of {II} and should find support around 44 - 42 levels. This scenario may not be as bad for USDINR as case I.

Obviously Case I is very bullish for Indian equities, whereas Case II is bullish in the short term but will prove bearish in the medium to long term. I would like to draw your attention to a recent development, where India and Iran have entered into a pact, according to it Indian will buy Crude-oil from Iran but will pay them in GOLD not Dollars. Can this be the start of major economies fueled by domestic demand and not credit expansion, rejecting the Greenback as the globally accepted medium of exchange. As always only time will tell.


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