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The Indian rupee is showing some sign of strength. The domestic currency has made a weekly close above 83 for the first time since September last year. It has closed the week at 82.92 against the dollar in the onshore market. In the offshore segment, the rupee has closed further higher at 82.86. It is now important to see if the domestic currency manages to sustain above 83 or not, going forward.
On the global front, the US dollar index was stuck in a narrow range last week. But the US 10Yr Treasury yield had declined last week. The US inflation data released last week failed to set a specific trend for the market. The US Headline Consumer Price Index (CPI) inflation rose 3.3 per cent (year-on-year) in December last year. This was higher than the 3.12 per cent rise seen in November last year. But the Core CPI rose at a slower pace. It rose 3.9 per cent in December last year compared with 3.99 per cent seen in the previous month.
Rupee outlook
An important resistance for the rupee is at 82.70. Immediate support is at 82.95. Above that, there is a cluster of supports in the 83.05-83.15 region. As long as the rupee stays above 82.95, the chances are high for it to test 82.70 this week. If it manages to break 82.70, then a further rise towards 82.50 is possible in the short term.
On the other hand, if the rupee remains below 82.70, it can remain stuck in a range of 82.70-82.95. A break below 82.95 can take it down towards the 83.05-83.15 resistance zone.
Dollar: Range bound
The dollar index (102.40) was stuck in between 102 and 102.75 all through last week. That leaves the near-term outlook unclear for the greenback. The broad range of trade can be 102-103. A breakout on either side of this range will determine the next move.
A break above 103 will be bullish to see 104-105 on the upside. On the other hand, a break below 102 can drag the dollar index down to 101-100 again. That will also indicate the beginning of a fresh leg of fall which might have the potential to drag the index below 100.
Turning weak
The US 10Yr Treasury yield (3.94 per cent) failed to sustain above the 4 per cent mark and has come down last week. The resistance at 4.1 per cent is holding very well. On the charts, the near-term outlook is weak. Immediate support is at 3.9 per cent. A break below it can take the 10Yr Treasury yield down to 3.8-3.7 per cent this week.
The region between 4 per cent and 4.1 per cent will continue to act as a strong resistance. A strong break above 4.1 per cent is needed to turn the outlook bullish. Only in that case, the chances of a rise to 4.2 per cent will come into the picture.
Mixed outlook
The euro (EURUSD: 1.0951) has been stuck between 1.09 and 1.10 last week. The outlook is mixed and unclear. A breakout on either side of 1.09 or 1.10 is needed to get clarity on the next move.
A break above 1.10 can take the euro up to 1.11 or 1.12. On the other hand, a break below 1.09 will drag the euro down to 1.0800 or 1.0750. It will also keep the euro under pressure to see even 1.07 on the downside. Overall it is a wait and watch situation now.
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