Pound-Rupee Downtrend Intact, but July Low is Key to Triggering Further Losses

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- GBP/INR downtrend expected to remain dominant

- Expected to continue declining if July lows breached

GBP/INR is trading at around 85.73 on Tuesday, down 0.50% this week so far and studies of the charts suggest the exchange rate will probably trade lower in the short-term subject to a break below the July 17 lows.

The 4hr chart - used to determine the short-term outlook, which includes the coming week or next 5 days - shows the pair rolling over after its most recent correction.

The pair made new lows at 85.08 on July 17 but then bounced up to 86.45 the next day. Since then it has been rolling over and has fallen back down.

Today it gained an extra impetus after markets discounted further risks of a no-deal Brexit due to Boris Johnson’s election as new prime minister.

Given the charts overarching bearish themes, the pair will probably resume its downtrend. A break below the July 17 lows would probably confirm another leg down to a target at 84.00.

The daily chart - used to give us an indication of the outlook for the medium-term, defined as the next week to a month ahead - shows the pair having formed a price pattern called a ‘measured move’ which is biased to continuing lower.

Again, assuming a break below the 85.08 July 17 lows, the pair will probably continue down to a target inside a zone between 82.50 and 83.50.

This is based on the length of the first a-b leg of the measured move which is extrapolated lower by 61.8% and 100% produces the two levels encompassing the target zone.

The weekly chart - used to give us an indication of the outlook for the long-term, defined as the next few months - shows the formation of a bearish H&S topping pattern.

The H&S is composed of three peaks - a head and two shoulders. A break below the neckline, which has already happened, confirms a decline as deep as the pattern is tall. This suggests an eventual downside target at 80.75.

A break above the red trendline connecting the head and the right shoulder would negate the bearish forecast.