Dollar index was stuck in a narrow range all-through last week. The index oscillated around 102 and has closed the week at 101.93, down marginally by 0.08 per cent. Last week’s candle indicates indecisiveness in the market.
Central bank meetings
This week is packed with a series of major central bank meetings. To start with, the US Federal Reserve’s meeting outcome is due on Wednesday. Market is expecting the Fed to increase the rates by 25 basis points. Any hint on the prospects of slowing down the pace of rate hikes will be negative for the greenback. The press conference of the Fed Chairman Jerome Powell will need a close watch.
Following the Fed meeting, the Bank of England (BoE) and the European Central Bank (ECB) are scheduled to announce their monetary policy on Thursday.
The dollar index (101.93) continues to remain mixed. The support at 101.50 is continuing to hold well. However, the index is not gaining momentum to see a sustained rise above 102.50. Only a strong break above 102.50 will give some breather and take the index up to 103-103.50.
On the other hand, the dollar index will come under more pressure if it declines below 101.50. Such a break can drag it down to 101-100 and even lower going forward.
Overall, the index is struggling to find a direction to move. We will have to see if the Fed meeting outcome can set the path for the next move.
The euro (EURUSD: 1.0868) broke above the resistance at 1.0890 last week, but failed to sustain. The currency made a high of 1.0929 and has come off giving back most of the gains.
Immediate support is at 1.0840-1.0835. If the euro manages to sustain above this support, it can rise to 1.10 and 1.11 in the near term. We reiterate that a rise beyond 1.11 is unlikely. We can expect a corrective fall to 1.07-1.05 from around 1.11.
On the other hand, if the euro declines below 1.0835 from here itself, it can fall to 1.0765-1.0750 this week.
Go either way
The US 10Yr Treasury yield (3.50 per cent) oscillated around 3.50 per cent last week and has closed on a mixed note. The immediate outlook is not very clear and the 10Yr Treasury yield can go either way from here.
Intermediate resistance is at 3.56 per cent. A sustained break above it can take the yield up to 3.7 per cent.
On the other hand, if the yield remains below 3.56 per cent and breaks below 3.40 per cent it can fall to 3.30-3.28 per cent. It is a wait-and-watch situation for now.
The Indian Rupee (USDINR: 81.52) witnessed a sharp fall last week. The resistance at 80.80 mentioned last week has held very well. The rupee made a high of 80.88 and reversed sharply lower to make a low of 81.77 last week. The sudden and sharp pull-back last week increases the doubt of a possible intervention from the Reserve Bank of India.
Supports 81.80 and 82.00 can limit the downside for the rupee from here. As long as the rupee trades above 82, the chances are high for it to rise back to 81-80.80 again. A break above the intermediate resistance at 81.40 can see the rupee strengthening back to 81.
Overall, the Indian rupee can oscillate in a range of 80.80-82.00 for a few weeks.
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