The US dollar continues to remain subdued. The greenback seems to lack momentum to move up strongly. This coupled with the strength in the domestic equity markets may aid the Indian rupee to strengthen against the dollar going forward. As mentioned last week, the rupee is continuing to move up gradually against the green back. Last week, the domestic currency has managed to close at 81.86, just above the key 82.00-81.90 resistance zone in the off-shore market.
The short-term outlook is positive for the rupee (USDINR: 81.89). Supports are at 81.90 and 82.05. Below these, 82.25 is the next strong support. The chances are high for the rupee to sustain above 82.05. Rupee can strengthen to 81.65 this week. A break above 81.65 can take it further up to 81.50 and 81.30 in the short term. The chances of an extended rise even up to 81 cannot be ruled out. Broadly, the 81-83 range is intact and the rupee can move towards 81 in the coming weeks.
A strong break below 82.25 will be needed to bring the rupee under pressure. Only in that case, the danger of the currency weakening towards 83 will come back into the picture.
The US 10Yr Treasury yield (3.39 per cent) and the dollar index (102.09) are coming closer to their crucial support levels of 3.10 per cent and 101-100.50 respectively. The near-term outlook is weak for both. So, the dollar index and the 10Yr yield can fall to test their key supports at 101-100.50 and 3.1 per cent respectively. The price action thereafter is going to be very important to watch.
A bounce from the 101-100.50 support zone can take the dollar index up to 103 again. But a break below 100.50 will be very bearish for the index. Such a break will drag it down to 100 and even lower going forward.
On the other hand, the 10Yr Treasury yield can rise to 3.3-3.5 per cent again if it manages to bounce from around 3.1 per cent. That will also bring back the chances of seeing 4 per cent on the upside over the medium term.
The US jobs data was released on Friday. The non-farm payroll increased by 236,000 in the month of March. The payroll data over the last few months indicates a slowdown in the pace of hiring. The unemployment rate in the US fell to 3.5 per cent in March from 3.6 per cent a month ago. For the coming week, the US retail sales number on Friday is the only major data release to watch.
The euro (EURUSD: 1.0905) rose further and has been holding higher. Though it has come-off from the high of 1.0973 last week, the downside could be limited. Supports are there at 1.0850 and 1.0800. The chances are high for the currency to sustain well above 1.0850 going forward.
The short-term outlook is bullish. The euro can break 1.10 and rise to 1.11 and even 1.12 in the coming weeks. Thereafter, a corrective fall is possible. The rise to 1.10-1.11 will get negated only if the euro falls below 1.08. In such a scenario, the euro can fall to 1.0650 and even lower.