The US dollar index been oscillating between 104.6 and 106.85. Last week, the barometer came under pressure after inflation data release. The US headline inflation increased 8.5 per cent (year-on-year) in July, slower than the 9 per cent rise seen in June. This is giving rise to early hope that the inflation in the US is cooling down. However, we will have to wait for some more time to get a confirmation on the same.
The dollar index fell sharply from above 106 to a low of 104.64 after the inflation data release. However, it has managed to rebound from the low and close at 105.63, down 0.93 per cent for the week.
For the coming week, the US housing starts data on Tuesday and the retail sales numbers on Wednesday are important to watch.
The overall trend is still up. Within that, the dollar index (105.63) is on a corrective fall now. The immediate support is at 105, which is holding well now. The immediate resistance is at 107. The index has to rise above 107, to regain the bullish momentum and move up again to 108-109. If the index breaks 105 decisively and falls subsequently below 104, then an extended fall to 102.50 can be seen.
The region between 102.50-102 is a strong support zone. A break below it is unlikely. As long as the dollar index remains above 102, the long-term outlook is bullish for it to test 112-114 in the coming months.
For now, we will have to wait and watch the price movement for a week or two to get clarity on the short-term movement.
Euro: Resistance ahead
The bounce in the Euro (EURUSD: 1.0259) from the low of 0.9950 made in July, seems to be lacking strength. There is a strong resistance at 1.0365 and 1.0380. A strong rise past 1.0380 is needed for the Euro to move further up towards 1.05.
However, the bias is negative. As such, we can expect the upside to be capped at 1.0380. A fresh fall from either 1.0365 or 1.0380 can drag the currency lower to 1.0200-1.0150 and then to 1.00-0.9950 again eventually.
The long-term trend is down. The euro can fall to 0.96-0.95 in the coming months. But whether this fall is going to happen from here itself or after an extended rise to 1.05 or 1.07, is not very clear at the moment.
Treasury yields: Mixed
The US 10Yr Treasury yield (2.83 per cent) oscillated between 2.67 and 2.90 per cent last week and has closed on a mixed note. On the charts, last week’s candle indicates indecisiveness in the market. Immediate support is at 2.8 per cent and the next one is at 2.75 per cent. A break below it can take the yield down to 2.5 per cent.
On the upside, resistance is in the 3.05-3.1 per cent region. A sustained rise above 3.1 per cent is needed to become bullish and indicate that the broader uptrend has resumed.
For now, we can look for a range of 2.75-3.1 per cent (narrow) or 2.5-3.1 per cent (broad) for a week or two.
Rupee: Key support ahead
The Indian Rupee (USDINR: 79.65) has declined sharply over the last couple of weeks. It tested 79 in the first week of this month but has given back most of the gains thereafter.
Immediate support is at 79.80. A strong break below it can take the rupee down to 80 and lower in the coming weeks. A decisive weekly close below 79.80 will indicate that a fresh fall has begun. That will open doors for a test of 81-82 on the downside over the medium-term,
On the other hand, if the rupee manages to sustain above 79.80, it can strengthen to 79.20-79 again. A break above 79 will see the upmove extending up to 78.60-78.50. Overall, the price action around 79.80 this week will need a close watch.