Dollar remained broadly stable last week. The dollar index broadly oscillated in a sideways range between 101.5 and 103. The index seems to lack strong sellers below the crucial 102-101.8 support zone.
The region between 102 and 101.8 will continue to remain as the key support zone. A sustained break below 101.8 can take the dollar index down to 101 and even lower in the near term.
Immediate resistance is at 103. A break above it will give some relief and take index up to 104. The upside can extend up to 105 if the index manages to breach 104. However, as mentioned last week, the dollar index has to breach 105 decisively to turn the short-term outlook bullish. For now, that looks less likely to be seen immediately.
The resistance at 1.0890 on the euro (EURUSD: 1.0856) mentioned last week is holding well. However, the euro has not seen a strong pull-back and it continued to hover higher below the resistance.
On the daily chart, the bias is positive for the near term. As such, we can expect the euro to break 1.0890. A strong follow-through rise above 1.0890 can take the euro up to 1.10-1.11 in the short term.
As mentioned last week, a rise beyond 1.11 is less likely. A corrective fall to 1.07-1.05 is more likely to be seen from around 1.11.
The US 10Yr Treasury yield (3.48 per cent) broke below the support at 3.40 per cent and fell to a low of 3.32 on Thursday. However, thereafter it has bounced back well to close the week at 3.48 per cent.
There is a crucial support at 3.29 per cent which has held very well. However, a key resistance is immediately at 3.52 per cent. The 10Yr yield has to surpass this hurdle to ease the downside pressure. Only in that case, the 10Yr Treasury yield can rise to 3.60-3.65. Failure to break above 3.52 per cent can see a pull-back to 3.4-3.3 again.
The US Personal Consumption Expenditure (PCE) – the Federal Reserve’s inflation gauge data is due for release on Friday this week. A fall in the PCE could be negative for the yield as it would increase the speculation in the market for a slowdown in the interest rate hikes.
The Indian Rupee (USDINR: 81.12) fell to a low of 81.88 initially last week. However, the domestic currency managed to recover sharply from there to close the week on a strong note at 81.12 in the onshore market. In the off-shore segment, the currency has strengthened further and has closed much stronger at 80.98.
A very crucial hurdle for the rupee is at 80.80. If the rupee manages to break above 80.80, it can strengthen towards 80.40 and even 80 in the coming weeks. Such a move will also form a double bottom on the daily chart.
On the other hand, if the rupee reverses lower again after testing 80.80, it can fall to 81.30. As such, the price action around 80.80 will need a close watch this week.