Amazin Journey of USD INR from Lows of 39 to Highs of 69

USDINR has gone through dramatic ups and downs in last 6 years. Let’s have a look

Here’s the weekly Chart of USDINR back in 2007-2010 period

 

Source: Chartalert.com

In 2007, everything was going India’s way. USDINR was trading at 39. FIIs were pumping money like there is no tomorrow. But 2008 subprime turbulence disrupted the momentum pretty badly. Equity market started selling off and FIIs were on SELL mode. It did impact currency market and INR depreciated from 39 to 43 by middle of the year in 2008. Nothing catastrophic. People were still bullish on India. Though Technically, USDINR was above 100 week moving average; and INR looked vulnerable. BUT then came Lehman crisis – and it just broke the back of both currency and equity markets. USDINR zoomed from 100 week ma and 42 all the way to 52 by March 2009. It was a 24% depreciation in less than 9 months. That was first major depreciation India saw after a long long time. 
The depreciation peaked with Ben Bernance green shoots remarks. Early recovery in Global markets helped INR appreciate from 52 to 49. The INR got another bullish dose with UPA Government coming back to power with more majority. INR from 52 in March 2009 appreciated to 47 by end May 2009; and 44 by March 2010. Lehman crisis looked like a small bad dream. Again India was back and things were looking up. Every Heads of state around the world were making India visit with large business delegation with Obama visit scheduled in Nov 2010.
Reality Check: INFLATION, CORRUPTION, BAD GOVERNANCE (This is INDIA) 

Equity market reversed pretty dramatically in Nov 2010 but it took a while to see the impact in currency market. USDINR made a base at 44 for long time before breaking out in August 2011 and making a new HIGH of 53.5 by Dec 2011. Indian story just turned nightmarish for everyone

 

The above weekly chart captures the dramatic depreciation of USDINR between July 2011 and July 2012. It was a depreciation of about 30% in 12 months. And YES this was worse than Lehman and it was real. 
FORMATION OF TRIANGLE PATTERN:

 

Then, between July 2012 and May 2013: a triangle pattern was getting formed. Though it was a continuation pattern but lots of folks were turning optimistic on reform measures announcement by Government. Nobody knew which way it would break. Ben Bernanke Taper remarks helped and USDINR broke out on the upside and had a blow out move from 57 to 69 ~ a move of 22% in less than 3.5 months.
But with change of guard at RBI and delay in QE tapering, INR has pulled back from panic lows of 68-69. But the big question: Can the reversal sustain?
ROAD AHEAD
USDINR has pulled back substantially from panic levels of 68-69. But with two major risk events ahead: 1. Indian elections; and 2. US Fed Exit from QE, one cannot be very optimistic on INR. At this point of time, we can assume that near term panic is behind us but a higher base at 57-60 has been set for USDINR. On panics, we don’t know where USDINR can go. Remember, INR is in Long Term Bear Market which means it still is Sell on Rally.