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Watch the Price action of USDINR to find the bottom in Nifty 50

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

Nifty 50 | Stable Uptrend in 30 min Time frame

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

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, theres one reason which cant be ignored. To truly understand the Price action of Nifty, focus on theIntermarket relationshipbetween USDINR and Nifty50.

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

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 FIIs 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 theyre invested in Indian stocks. Rising rupee improves the attractiveness of Indian stocks whereas decreasing rupee could increase therisk factorin 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 ondirection of USDINR. Yep! Dollar is the King, so to truly spot the turning point in Nifty 50, watch thePrice actionof USDINR.

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About the author

Balaji is a Trader, Investor and Self published Blogger. He wrties frequently on his website Balaji is specialised in applying systematic Price action trading strategies and Global Macro techniques on financial markets such as Equities, Dervatives, Futures and Bonds. He is well versed on both International and domestic markets and has trading experience of more than 8 years.  
As a trader his core purpose is to generate superior risk adjusted returns on consistent basis by applying Flexible risk managment combined with a Postive expectancy of Price action strategies. He writes passionately about Technical analysis, Trading strategies, Price Action setups and Global macro events. 
Apart from trading and Blogging, Balaji also mentors aspiring traders, Investors on becoming succesful in highly competative financial markets. He offers permium trading course on which he covers Price action trading methods, Institutional trading strategies and Macro trading.

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