Rupee Limps, No Relief in Sight

The Rupee, India’s national currency took more than 5 years to gain from 49 in May 2002 to 39 in January 2008.  It took just barely nine months however to lose 70 percent of its gain as it closed at 47 on Tuesday.  

The Rupee was down 20 percent from its low in January triggered by the conflagrating turmoil of the global equity market hit hard by the collapse of Lehman Brother and the troubles at Merrill Lynch.

Dollar Retreat Did Not Help Rupee

The retreat of the US Dollar from its previous gains did nothing to prop up the Rupee and improve market sentiments on the Indian currency.  On September 12, the Dollar reversed its index after a peak 80.5 following bearish patterns.  It was soon followed up by 77.6 nose dive on Monday.  

Short term outlook however for the greenback remains positive as it holds on above the 76 levels.  The Rupee was generally weak on the Non Deliverable Forward market.  This weakness pushed the Indian currency to tumble.  The NDF market one month quoting was 47.14 on Tuesday.

The movement of Rupee shows a clear pattern as it charts a second wave of long term correction beginning May 2002.  Analysts said that the pattern should have stopped at the 45.2 levels or 61.8 percent of retrace from the previous movements.  An upward move towards the 49 peak levels is not farfetched as the currency has breached the ideal retracement levels.  Analysts however are predicting that the upward move could take more than a month to unfold.

Considering the third wave target from the 39 levels through and after making a one to one extrapolation the next level could be pegged at 46.2.  If the downward momentum will be sustained and the currency continues to burn at an accelerating pace, the next levels could be pegged at 48.9.

Downward Movement will stay Longer

Notice should be taken however that this trend will require that the monthly chart oscillation would be extremely oversold.  At a glance, the interface will show that the present rates are unsustainable.  Analysts are expecting continues downward movement for the long term but hopes are still high that once the decline ends, sharp increase would follow.

Concerns on capital flight added to the depreciation of the Rupee by more than 2.6 percent suffered at the last two trading sessions.  The support for the Indian currency is coming at the through of 47.04 which cam about in July 2006.  Short term outlook however could take Rupee to 47.8 as the momentum of the two declining trading sessions gained force.

The near term resistance levels were pegged at 45.9 and 45.2.  The near term resistance will experience continued pressures as the Rupee stays below of the first resistance levels.