The Indian rupee seems to be struggling after its sharp fall on election results day last week. The domestic currency faces resistance around 83.35. It has declined and closed Tuesday’s session on a weak note at 83.57. It is now poised near a crucial support level of 83.60.

A sharp rise in the US dollar index on Friday after the US jobs report has kept the rupee under pressure over the last couple of days.

Fed meeting

The US Federal Reserve meeting outcome is due on Wednesday. The market expects the central bank to leave interest rates unchanged. However, the economic projection to be released in the meeting could play a key role in moving the markets.

All eyes will be on interest rate projections for this year. The market expects the first rate cut in September. In its previous economic forecast released in March, the Fed had indicated a total of 75 basis points rate cuts in 2024. Any change in this forecast will impact the dollar index movement accordingly.

If the Fed revises this rate cut lower from the earlier 75 basis points, that would be positive for the dollar. In that case, Treasury yields will rise. That, in turn, will take the dollar index higher.

Dollar index outlook

The near-term outlook for the dollar index (105.37) is positive. It could test 106 ahead of the Fed meeting. The outcome of the Fed meeting could decide whether the index can break 106.

A break above 106 can take the index up to 107. On the other hand, a downward reversal from around 106 can take the index down to 105 and 104 again. In that case, the 104-106 range could remain intact for some more time.

Rupee outlook

As mentioned above, 83.60 is a crucial support for the rupee. A decisive break below 83.60, could see it weaken towards 83.80 and even 84 in the coming week. That will also keep the door open for the rupee to see an extended fall to 84.20 and 84.50 over the medium-term.

To avoid this fall, the rupee has to sustain above 83.60 and get a sustained rise above 83.50. If that happens, a recovery to 83.30 is possible. A further break above 83.30 can take it up to 83.20 and 83.10 again.

In that case, the broader range of 83.00-83.60 will continue to remain intact for some more time.