Alarm bells for sterling versus Indian rupee

This currency pairing has taken a tumble since last October. Our chartist looks for upside potential.

Sterling vs India rupee GBP:INR 

It's been some time since we covered this particular pairing, something of a surprise as we'd generally been quite spiteful about the Force India Formula 1 outfit. Thankfully, Farce India are no more, the team taken over and renamed Racing Point and still based at Silverstone.

The rupee (INR)/sterling relationship needs, like so many other instruments, a glance back 10 years to 2009 as we need to make a decision on the visuals for the intervening 10 years since the last financial tumble.

At present, there are a few alarm bells ringing with this pairing as weakness now below 86.25 INR risks reversal down to an initial 83.80 INR.

This risks being significant, again breaking the long term uptrend and risking continued reversals to 79 INR, should 83.80 INR break on the initial drop.

It's probably worth looking at the inset on the chart below. The relationship was gapped (aka manipulated) back above the ruling uptrend in August, suggesting the market was perfectly aware the dangers of a drop. 

In this particular instance, despite 79 INR making a lot of visual sense as "bottom", our software insists this scenario should complete at a bottom of 75 INR.

What if a miracle occurs?

The relationship needs to exceed 89.50 INR at present to suggest it's moving out of trouble. This should permit some recovery up to an initial 94 INR with secondary, if exceeded, calculating at a longer term 100 INR. There's certainly a heck of an argument favouring a pause at 94 INR but our secondary ambition looks less possible.

Source: Trends and Targets      Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, or interactive investor will be responsible for any losses that may be incurred as a result of following a trading idea.