Indian Rupee

Tracing the USD/INR price movement ever since its break above the trend-line a year back, one finds the unfolding of the typical impulse Elliot wave pattern.

In the above evaluation, I’ve applied 2 major rules of Elliot wave principle , viz.

• The bottom of the fourth wave, which is a pullback, cannot overlap the peak of the first rally. If it does, then it’s not a fourth wave.
• The third wave is never the shortest wave


If the above wave count is right, it appears that despite things looking extremely bleak for the rupee, we may in fact be in the final 5th wave of the impulse that should set the stage for a 3 wave corrective rally (rupee appreciation) that should typically ensue to complete the elliot pattern.

Where the 5th wave would end is still at the moment a wild guess, given that there are no overhead resistances to refer to, but by applying Fibo ratios to project, the following emerges as key probable areas of topping:

53.30, 54.50 and 55.40

OIL

Oil has staged a near perfect reversal of the multi month trend that was in existence since its peak in late July 2008. The above chart resembles very closely to the USD/INR fall from 47 to 39 and its bottom there.

Further confirmation –

• for the first time since Aug 2008, price has managed to close above the key 55 day EMA for 4 consecutive sessions.
• there is also a double bottom formation which puts the immediate minimum target at $65

Since price has reversed a multi month trendline, the momentum and velocity of the impending rally in oil is likely to be very high.

From a risk management perspective, it would be ideal for oil companies to hedge out their exposure for the next 6 months.