The recent surge in USDINR beyond 69.50 and that too with rising gap does not augur well for the rupee in the near term. This move has negated our earlier assumption that rupee may strengthen after short term surge in USDINR till 69.50.
With RBI holding excess Dollar reserves and globally with rise in dollar index, volatility in USDINR should have been easy to contain till 69.50. However, in case of a fall in Dollar index, the situation could go out of control in the near term.
Based on breakout in USDINR on long term charts, a move past 69.50 opens the gate for a move towards 74.50. A move towards 73.50 remains a very likely scenario in the near term. As the breakout has occurred with rising gap near 5 year resistance mark, we can expect immediate extension of up move towards 73.50.
Applying principle of pole breakout, minimum upside is seen at 73.50 and this could have negative impact on Indian equities.