Tech Musing:- INR update

I have always maintained that INR was grossly overvalued and should depreciate sharply towards 70 levels, but I am perplexed by the speed of deprecation.  I have been expecting that the current leg won’t go above 64 – 66 levels and INR should see some reversal from there. 

If we look at the first chart we can see that the channel resistance for INR was at 64 levels. In three days INR not only broke the channel but had reached the upper end of the channel. The target for current move in INR should be 70 assuming that this channel will not break again on the upside.

The second chart is a weekly chart of INR. In this chart we can see that weekly channel resistance in INR was at 65 levels. If INR convincingly breaks out above this channel than the target for INR will be upto 80.

But I feel that the current rally in INR is over stretched and we will see INR appreciating sharply in next one week. I don’t think INR is now ready to move to 80 levels.

The third chart is an update of my long term view on INR. I first wrote in June 2012 that INR should depreciate as inflation in India was much higher compared to US. I am updating the chart. If we look at the current chart fair value of INR is around 84 – 88 to USD assuming that productivity gains are equal.

Summary:-

1.       INR should face considerable resistance at 70 levels and I don’t expect this level to break.

2.       In case INR breaks 70 levels and give a weekly closing above it the targets can be as high as 80.

3.       Long term target for INR are in the range of 84 – 88.