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The much-awaited US Federal Reserve meeting last week finally turned out to be a non-event. The Fed raised the rates by 25 basis points in line with market expectation. The central bank failed to give any clarity on whether it would enter into a pause mode going forward. This will keep the next meeting on June 14, to be a very important event to watch. It is when the Fed will also give its economic projections. That will give a clear picture on the policy path for the rest of the year.
Range intact
The US dollar index (101.24) fell sharply after the Fed meeting outcome and tested its crucial support level of 101. Though there was a threat to break this support, the index had managed to sustain well above this support after that.
This keeps the 101-103 range intact. So, we still have to wait for a breakout on either side of 101-103 to get a clear cue on the next move.
We repeat, a break below 101 can take the index down to 100.50 initially. A further break below 100.50 will be very bearish. It can drag the index down to 98. On the other hand, a break above 103 will give some breather for the index and take it up to 104-105.
The US 10Yr (3.44 per cent) fell after the Fed meeting. It made a low of 3.29 per cent and has bounced back slightly. Broadly the 3.25-3.65 per cent range is still intact. The range breakout will decide the next trend.
Mixed Outlook
The euro (EURUSD: 1.1019) is also stuck between 1.09 and 1.11. The European Central Bank slowed down the pace of rate hike and increased their benchmark rates by 25 basis points last week. That did not have any major impact on the euro movement.
The immediate outlook for the euro is unclear. A breakout on either side of 1.09-1.11 will determine whether the currency will fall to 1.08-1.07 or rise to 1.12-1.1250.
Positive signs
The Indian Rupee (USDINR: 81.79) was stuck between 81.65 and 81.95 last week. The near-term picture looks mixed, and range bound. However, the price action on the daily chart leaves the bias positive. That increases the chances for the rupee to break 81.65 and strengthen towards 81.50 initially. A break above 81.50 can see the rupee moving further up towards 81.25 against the dollar going forward.
Immediate support is at 82. Above that 82.20-82.25 is the next important support. The above-mentioned bullish bias will come under threat if the rupee falls below 82. A subsequent break below 82.25 will turn the outlook negative. In that case rupee can weaken towards 82.50 and even 83 again.
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