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The US dollar index has been stuck in a narrow range over the last few weeks. 101-102 (narrow) and 101-103 (broad) has been the trading range over the last four weeks.
As mentioned last week, the index might need some new trigger to witness a range breakout on either side of 101-103. That, in turn, will set the trend for the greenback going forward.
A series of important events and data releases are due this week. That leaves the chances high for the dollar index to break its range on either side this week. We will have to wait and watch.
Eventful week
The coming week is packed with a slew of central bank meetings and important data releases. It all will begin with the US Federal Reserve meeting outcome on Wednesday. Market’s expectation is mixed. Some expect the Fed to increase the rates by 25 basis points this week and hint for a pause going forward.
There is also some noise in the market to see a pause in this meeting itself. So, the outcome of the Fed meeting this week will be very interesting and also important to watch.
This event will be followed by the European Central Bank (ECB) meeting on Thursday. Finally, the week will end with the US jobs data and unemployment data release on Friday.
Mixed outlook
The dollar index (101.66) is still stuck inside the 101-103 range. So, there is no major change in the view.
The index has to breach the 101-103 range on either side to give clarity. A break above 103 will be bullish to see 104 and 105. On the other hand, a break below 101 will take it down to 100.5 initially.
A further break below 100.50 will increase the downside pressure and drag the dollar index down to 98.
Sustains higher
The euro (EURUSD: 1.1019) is managing to sustain higher. But the currency seems to lack momentum to breach 1.11. Immediate support is at 1.0950. Below that 1.09 is the important near-term support.
As long as the euro trades above these supports, the chances will remain alive to break 1.11. Such a break can take the currency up to 1.12-1.1250.
The euro will come under pressure only if it falls below 1.09. Such a break can take it down to 1.07.
- Also read: Global 360: Rupee can see a fresh rise
Range bound
The US 10Yr Treasury yield (3.42 per cent) fell sharply initially last week. The bounce from the intra-week low of 3.37 per cent failed to get a strong follow-through rise above 3.5 per cent.
This leaves the bias negative to test 3.35 per cent and lower levels in the near term.
Broadly, 3.25-3.65 per cent is the trading range within which the 10Yr yield can oscillate. A breakout on either side of this broad range will give clarity on the next direction of move.
Positive bias
The Indian Rupee (USDINR: 81.83) has recovered well last week. The support at 82.25 continues to hold well. But at the same time, the domestic currency is not gaining strength to break the resistance at 81.50. So broadly, 81.50-82.25 will continue to remain as the trading range for the rupee.
However, the charts leave the bias positive. The chances are looking high for the rupee to break 81.50 and strengthen towards 81.20-81.15 in the near term.
Rupee will come under pressure only if it falls below 82.25. Such a break can drag it down to 82.50 and even 83 again going forward.
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