In the last few months, technology stocks has lent tremendous support to benchmark indices like Nifty and Sensex, thanks to the various buy-back announcements and strong dollar. Technology stocks have acted as a defensive bet during volatile times and helped Nifty to rally.
Although NIFTY IT is trading at all-time high, price pattern suggest lapse in momentum and formation of trend reversal pattern on the medium term perspective. An appearance of rising wedge pattern calls for caution and opens downside risk of 14% in the near term. At present, the breakdown levels is mere 2.2% away, but from current levels one needs to remain highly cautious.
The dollar index in the past few months has been stuck in the trading range of 93.5-95.5 which has been the sole reason for USDINR trading firmly above 68.5. However, despite the recent rally in Indian stock market indices namely Nifty and Sensex, there has been lack of decisive strength in the rupee. Next few days remains very tricky for USDINR as 68.5 levels has turned out to be a make or break levels.
Based on change in polarity principle, earlier top of 68.45 which occurred on 29 May 2018 is likely to act as a strong support. With rising support line extending from lows of 66.8 on 4 Jun 2018 suggests a reversal possibility at 68.5. This should force it to re-test upper band of ending diagonal which falls in the range of 69.4-69.60.
Strong USDINR may have downside pressure in financials stocks and could also trigger some weakness in Bank Nifty.
Although GBPUSD may be struggling to sustain above 1.31, it has already been butchered down from the highs of 1.438 to all the way to 1.29 on expectation of BREXIT. Though from current levels there seems to be no scope for downside. In fact the price data of GBPINR shows clear breakout from Cup and handle formation and the recent bullish pennant suggests that the next leg of up move remains on the cards.
In the very short term, price projection falls in the range of 93-95 i.e. an upside between 3.6%- 5.5% for the GBPINR pair.
On the medium term perspective (6-12 months), the price projection falls in the range of 104-107 which is an upside of 15-17% for GBPINR.