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The US dollar remained broadly stable last week. The US 10Yr Treasury yield, on the other hand, has come down well. The dollar index sustained well above its support at 103.5 last week. It has closed on a flat note at 103.86. The US 10Yr Treasury yield touched a high of 4.32 per cent, but then fell sharply giving back all the gains. It has closed the week at 4.18 per cent.
The US Personal Consumption Expenditure (PCE) – the Federal Reserve’s inflation gauge came inline with the market expectation. The PCE for February was at 2.4 per cent (year on year), down from 2.62 per cent a month ago. This week, the much-watched US jobs data will be released on Friday. That will need a very close watch.
Dollar: Range bound
The near-term outlook is unclear for the dollar index (103.86). It has resistance in the 104.50-105 region and support in the 103.50-103 zone. So broadly, 103.50-104.50 or 103-105 can be the overall trading range for the dollar index. A breakout on either side of 103-105 will then determine the next leg of move.
A break above 105 will be bullish to see 106-107. On the other hand, a break below 103 can drag the dollar index down to 101-100.
Euro: Support holds well
The support in the 1.08-1.0780 mentioned last week has held very well inline with our expectation. The euro (EURUSD: 1.0837) touched a low of 1.0796 and then rose back well. As long as the euro remains above 1.08, the bias is positive to see a rise to 1.0950-1.10 in the near term.
The currency will come under pressure only on a decisive break below 1.08. In that case, a fall to 1.07-1.06 is possible.
The European Central Bank (ECB) meeting outcome is due on Thursday. That will be an important event to watch, as it can cause volatility in the market.
Treasury yield: Weak
The US 10Yr Treasury yield (4.18 per cent) has been facing strong resistance in the 4.30-4.35 zone. The sharp fall last week leaves the near-term outlook negative. Immediate support is at 4.15 per cent. A break below it can drag the 10Yr yield down to 4.08 per cent and 4 per cent in the coming days. The price action thereafter will need a close watch.
A bounce from around 4 per cent can take the yield up to 4.2-4.3 per cent again. But a decisive break below 4 per cent will be bearish to see 3.7 per cent and even lower levels.
Rupee: Stuck in a range
The Indian Rupee (USDINR: 82.91) was stuck in a narrow range of 82.84-82.95 all through last week. It has closed in the onshore segment at 82.91. But in the offshore market, the rupee has closed slightly higher at 82.84.
The near-term outlook is slightly mixed. Support is around 82.95. As long as the rupee trades above this support, the chances of testing 82.75-82.70 cannot be ruled out. A break above 82.70, if seen, can take the rupee up to 82.60-82.50.
A break below 82.95 is needed for the rupee to decline towards 83.05-83.10.
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