Tech musings

Interest rates in India have been below inflation rates now for years in a row. Finally it seems that interest rates in India are all set to move higher.  If we look at the given 10 year Indian treasury yield chart we can see that the 10 year yield has just broken above the down channel. Expect 10 year yield to move up to 9% and 10% in next few months.

Finally the stage is set for INR to depreciate sharply. All pieces of the jigsaw puzzle are falling in place and will result into INR trading at 70 – 72 levels in 12 – 18 months time. I first wrote about INR falling to these levels on May 4 2012.

If we look at the near term chart of INR, it seems that INR will see a near term top at 63 - 64 levels. Since it’s a monthly channel line I think INR won’t be able to break above this channel in near term. Also RBI should come up with interest rates hike to protect INR but ultimately INR will depreciate to 70+ levels in next 18 months.

The last chart is a 10 year US treasury yield chart. It is quite possible that US 10 year treasury yield may go into a side way consolidation before moving upward and breaking 3% barrier.  Spanish and Italian 10 year treasury yield may continue to fall for few more months before finally breaking out. Similarly it looks as if Euro and GBP will also make a final push upward towards 1.40 and 1.60 levels before resuming their downtrend.

As per my understanding of Technical analysis it quite possible that interest rates and Dollar will continue to consolidate for next 5 months and resume their uptrend only in next year 2014. But one thing is very clear that higher interest rates and strong dollar will be a norm going forward. The era of low interest rates seems to over. I won’t be surprised if US 10 year treasury yield trades above 4% in next one year and 6% by 2016.