Wednesday, August 31, 2016

Dollar Index-USD INR & Gold

Dollar Index has been undergoing a prolonged correction since 2001.It had formed a triangular pattern at the point marked as E and then broke out strongly. Since March 2015, it had entered into a sideways move, by way of a complex correction. Either the move out of E is the next leg of a diametric formation as F and currently we are in the last leg G of the prolonged correction from 2001.Or the move out of point E is the start of a new impulse 1 and we are in wave 2 right now. Any way the complex correction has some more downside left..
See the expanded chart...

We see the complex correction clearly here. Also when Fed raised interest rates, contrary to classical thinking, Dollar did not strengthen. It actually depreciated.Probably the markets are not likely convinced about the Fed analysis of the economy strengthening. Indicators point out that the economy has been strengthening only feebly and is still prone to sudden shocks.The complex corrective wave of G or 2 has been going on for a year now and may end soon after the elections.Then dollar could enter into a new impulse or wave 3 of an existing impulse. That could see sustained dollar strength probably next year.
Next chart is of International Gold...

We see that when Dollar depreciated from 2001 , Gold was in a sustained bull run exhausting itself on September 09, 2011 (09/11 ! ) the same time Dollar bottomed out.After that Gold had a correction from 1900 levels to 1050 levels as wave A. Since the rise of Gold was sustained, we surmise that Gold correction is not yet over. So the recovery from 1050 levels is wave B.It is still on going.We see the nature of B wave in the recovery of Gold..hesitant and overlapping. In an isolated view Gold may seem to be in a bull market, but definitely wave C down has to come to end this correction of Gold.

That could very well coincide with a sustained Dollar rise, since they inversely correlate.              

This  chart is that of USD INR..

  Dollar bottomed out against the rupee in 2008 and since then has been on an impulsive rise.Currently it is in wave 4 of wave 3. Wave 3 seemed to have topped out somewhere in the 68.80 range and since then rupee has been appreciating.In fact it was in the week of Feb 26, coinciding with a Stock market bottom. Thereafter the rupee appreciation is coinciding with FII money coming into India.Since the 4th wave is ongoing more fund flow into emerging markets may happen.Market top next year may likely coincide with FII withdrawal as well. I would look at dates in Feb March 2017 for such an event.
Last chart is of Gold in rupee terms.. Iam re-posting this since it is easier to compare in one post,
Here the same pattern similar to International Gold may be observed. Only thing is the correction is a lot shallower...That is because we Indians love our Gold and anytime Gold falls we rush to buy.But the time cycles cannot be denied.Gold in India also has to decline maybe a little lesser than International Gold, but decline it may.
This is my gleanings of the immediate term and medium term trends in Gold, USD INR and Dollar. Of course I may be totally wrong and that would only give me more learning opportunities.
I do not trade any of these instruments. My interest is solely that of a research student.


  1. Sir,

    Will Gold INR will touch at least 35000 levels before starting downward journey towards 20000???

    Thanks for such informative charts.

  2. Yes there is possibility of a double top, but the way up may be laboured because it is in wave B.Not the usual whoosh we associate with an impulse top.2017 will be a watershed year in many markets!

  3. Dear mr.Tekkie Suresh,
    Can I request for you to explain what do you mean by watershed year if you do not mind please
    Thanks as always

  4. Dear Vick,
    I was referring to large time cycles getting matured starting from 2017. The planet Uranus is the most important planet for Stock markets. It is the one which brings about huge and sudden changes.Now, when Uranus goes through the first 10 degrees or last 10 degrees of a sign, we tend to get a huge long reversal reversal.Uranus will be in the last 10 degrees of Aries, from April 2017 onwards.In September 1929, Uranus was in 10 degree of Aries, when the Dow Jones collapsed.In 1845 April, it was in 6 degrees of Aries.In April 1761, it was in 10 degrees of Aries. During the Tulip Mania of November 1637, Uranus was in 24 degrees of Libra ( exactly opposite to Aries )In all these cases there were sudden market collapses and reversals where lot of money was lost.We can see that most of these crashes fit in with a 84 or 42 year cycle with an orb of 6 years.This is why 84 year cycle is referred to as long cycle of the stock markets.Crazy euphoria builds up and everything becomes topsy turvy. Don`t let any one tell you that there is no craziness in financial markets,now. Negative interest rates are crazy. Unrelenting QEs in one form or other is crazy.People paying ridiculous amounts for start ups is crazy.Killing in the name of God is crazy.This is why such long term cycles exist are very potent even now. Human conditions may have changed over the millennia, but emotions have not changed. Fear and Greed continue to rule roost.Coming back to our subject, Uranus will be in 24 degrees ( 20 to 30 degrees is the last ten degrees ) of Aries from April 2017 onwards.So it is likely that this bull market ends next year, that is in 2017. We see culmination of long term cycles in several categories such as Oil, Gold Forex, Bonds and stocks all in the next three years, beginning from 2017 till 2020.

  5. Sir,

    I am not understanding one thing.

    Even if market falls in coming year, you also told that Gold will also test 20K levels.

    Is not Gold and Stocks inversely related?

    I mean gold should rise when markets fall. Is not it???

    1. Not necessarily. Only if there is liquidity based push from one segment to other will there be an inverse correlation. In 2002 to 2007, stocks and gold both rose in tandem, because stocks were considered undervalued.In 2013, Money moved into stocks, because the environment became Gold averse, because of low inflation. ( Gold performs better when there is inflation).

  6. Dear sir i am Raju.abj
    your analysis is always proved to be best and i would like to follow you
    please add me and inform the way to connect with you ... this is me email id ...

  7. Thank you Raj. Just become a follower of the blog, which you can do on the right hand side panel and you will receive the blog link in your mail, whenever I post anything.