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Trying to find bottom in Nifty 50? Better watch the Price action of USDINR

After a drastic fall from 11800 to 10000, Surprisingly Nifty 50 is rallying back from last two weeks. It rose almost 550 points from the low of 10,000. Just zoom into the lower time frame chart of 30 min or 1h; you can see a stable uptrend.

Nifty 50 | Stable Uptrend in 30 min Time frame

After touching 10,000, Nifty rallied higher - Price action shows a stable uptrend in 30 min chart

Short term traders are rejoicing the bounce back. Perma Bulls (Ones who are desperately bullish and proclaim blindly to Buy – hold even in Bear markets) are pretty confident that Nifty has reached the bottom. Have a look at the Daily chart of Nifty 50, Price action do seems like stabilizing after a strong fall. But some prudent speculators are not convinced with the rally.

Price Action reflects buying interest on Daily chart of Nifty 50

Nifty Price action is stablizing after a major selloff - Outlook on Dailychart

Many reasons are attributed to the recent upheaval performance of Nifty 50. It can be a mere short covering rally or perhaps festival seasonality could be creating a Positive sentiment in the markets. Even year – end window dressing by mutual funds cannot be ruled out, given the fact Mutual funds are still one of the large players in Indian Markets. Despite all these plausible explanations, there’s one reason which can’t be ignored. To truly understand the Price action of Nifty, focus on the Intermarket relationship between USDINR and Nifty50.

Traders should look at the Inverse relationship between USDINR and Nifty 50

To understand the Price action of Nifty, focus on the Intermarket relationship of USDINR and Nifty50

Higher Exchange rate of US dollar and Indian Rupee is the primary cause of all Market turmoil we have witnessed so far. Why? Skyrocketing dollar prices has spooked out FII’s or the so-called Foreign Institutional Investors. They have pulled out crazily from Indian markets over the last few months. Higher Dollar value and depreciating Indian rupee means terrible loss for Foreign Investors, since they’re invested in Indian stocks. Rising rupee improves the attractiveness of Indian stocks whereas decreasing rupee could increase the risk factor in Indian stocks. Hence foreign Investors liquidate their holdings or limit their exposure whenever rupee value falls beyond a certain limit.

Right now things are slowly moving back to normal, Dollar value has started to decline, hence we see some buying interest popping up in Nifty 50. Whether it would sustain or not depends on direction of USDINR. Yep! Dollar is the King, so to truly spot the turning point in Nifty 50, watch the Price action of USDINR.


Trading Predator

About the Author:

Balaji is a Speculator, Investor and Trader (All in All!!!) and self published author. Trading in the Markets since decade, have seen more ups and downs along with institutional trader's lifestyle. He usually trades Nifty, Bank Nifty, Commodities, Futures cum Options around both Indian and global Markets. Balaji applies highly analytical and systematic Price Action strategies He blogs passionately about Trading strategies, Price Action Trading, Technical analysis, Macro events, Market setups, Financial and Economical topics. Apart from Trading and Blogging, Balaji also mentors aspiring Traders and Investors on becoming successful in highly competitive financial Markets.

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