The
first chart I am pasting is a long term quarterly chart of Aud. This chart is
to give my viewers and idea on how technical works in multi year period.
Readers can see that from 1974 to 2004 AUD corrected from a high of 1.4970 to a
low of 0.4776. After that we saw a 61.8% retracement of this entire move and
AUD moved up to 1.1014 levels. Once it hit this retracement level it was unable
to break above it and now again correcting. AUD may be heading towards 0.80 levels or lower.
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| AUD Quarterly chart |
In the next
chart we can see that CAD is making a reversal pattern and once it beaks above
the neck line we will see 1.15 on charts.
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| CAD Daily chart |
Next
we have a chart of Euro. Euro had broken below the trend line and is now
heading towards 1.14 levels as mentioned in my previous post on 26th
may
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| Euro |
Almost all
the experts I have heard are perplexed and unable to explain the sharp
depreciation in INR. I think to understand the intrinsic value of INR we should
adjust it for inflation differential between US and India. I took Indian CPI
data and US urban CPI ex food and fuel for last 30 years. Since INR have been a
controlled currency I took the base rate as on 1991 -1992 when INR was
deregulated and it depreciated by 23% in a single quarter. I assume that
INR had reached some kind of equilibrium level with respect to USD and reflected
true intrinsic value of INR at that level.
We can see
from the chart that from 1991 to 2003 INR depreciated completely in line with
inflation differential between US CPI and Indian CPI but since 2003 INR went
sideways and moved away from intrinsic value. If INR would have continued to
depreciate as per inflation differential then the current intrinsic value of
INR should be around 74.
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| INR adjusted for CPI differential. |
Similarly
if we take US urban CPI including food and fuel cost INR should be trading at
70 -72 levels. This projection is completely in line with my technical call. I
think INR will depreciate sharply to 70 levels in next one year.
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| INR adjusted for US Urban CPI including food and fuel |
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