The Pound-to-Indian Rupee exchange rate is seen making great strides higher on the combination of renewed Sterling strength and a loss of favour amongst investors for the Indian Rupee.
After the bonanza of buying in 2016 markets have cooled and Indian assets – equities mainly but also bonds – are past their peak of popularity.
Slowing growth and a central bank entering a contrary loosening cycle when the rest of the world is tightening adds to the Rupee’s woes.
The Pound meanwhile has enjoyed a flip from the Bank of England which increasingly looks set to trigger a rate hike in November.
From a technical perspective we note the pair successfully hit our bullish target from the week before at 84.90 based on the height of the move prior to the trendline break, extrapolated higher.
We also note the pair may have formed a triangle pattern on the weekly chart and broken out of that pattern, generating a further target higher.
The triangle formed after the pair bottomed in September 2016.
It has completed five constituent waves (a-e) and although wave D looks incomplete it nevertheless could pass as a wave. (Find out more about wages here).
Since then the pair has broken sharply higher.
The triangle probably indicates the medium-term downtrend may be reversing, as per the weekly timeframe:
The usual way to calculate the target for a move out of a triangle is to take the height of the pattern (navy line labelled ‘X’) and extrapolate it from the breakout point higher.
A minimum target can be found at a golden mean of the height of the triangle extrapolated higher – or 61.8% of the move - which gives a ‘minimum’ target at 89.00 (navy line labelled ‘Y’).
A clear move above the 87.30 level would probably confirm a continuation up to the next target at 89.00.
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