Major currencies continued to remain stable as the global markets enter the year-end holiday season. Both the dollar index and the euro retain their broad sideways range and may continue to oscillate within it in the near term.

The dollar index retains its 95.50-97 range while the euro remains within the 1.12-1.14 range. The major currencies are likely to remain stable as the market enters the year-end holiday season and trading is likely to be muted. However, the Indian rupee surprised with a sharp 1.4 per cent rise against the US dollar. The strong rise last week has brought to an end the four consecutive weeks of fall in the rupee against the dollar.

Rupee strengthens

The Indian rupee strengthened sharply, breaking above the resistance level of 75.75. Last week, we had expected the rupee to remain below 75.75. The domestic currency rose sharply to test 75 on the upside before closing at 75.02, up 1.4 per cent for the week. The strong rise breaking above 75.75 and then subsequently above 75.50 has put the rupee in a strong spot. Immediate support will be at 75.25. Next important and strong support will be in the 75.50-75.60 region. The rupee has to fall below 75.60 decisively to come under pressure again. On the charts, the chances are looking high for the currency to remain above 75.60 in the coming weeks. However, an intermediate fall to 75.25-75.30 this week cannot be ruled out. But thereafter the rupee can regain momentum and strengthen towards 74.50 and even 74 in the coming weeks.

Last week, we had warned of a fall to 78 over the medium term. That view still remains intact. However, it could get delayed. For now, the rupee can trade in a sideways range of 74-76 or 73.50-76.50 for a couple of months. Thereafter it can eventually break the range below 76.50 and fall towards 78.

Dollar, Euro: Unchanged

There is no major change in the view of the dollar index (96.02) and the euro (1.1319). We repeat the same view that has been mentioned in this column over the last couple of weeks.

The broad range of trade in the dollar index will be 95.50-97, which can continue for the next two-three weeks as trading is likely to be muted ahead of the year-end. However, the broader view remains bullish. As such we can expect the dollar index to break 97 and rise to 97.50 and 98 by January end.

As mentioned last week, 98 is a crucial resistance which, if broken, will pave the way for a test of 100. On the other hand, a pull-back from 98 can see a fall to 96-95 again. So, the price action around 98 will need a close watch.

The euro retains its 1.12-1.14 range. In case the currency breaks above 1.14, the upside can extend up to 1.1450-1.15 and not more than that. The overall view is bearish as the upside can be capped at 1.14 or 1.15. The euro is likely to break below 1.12 and fall to 1.10 and even lower in the coming months.

Yields rise back

The US 10Yr Treasury yield (1.49 per cent) broke below 1.4 per cent initially last week. However, the downside did not extend up to 1.3 per cent. It tested a low of 1.35 per cent and then rose back sharply. Immediate resistance is at 1.54 per cent. A strong break above it can take the 10Yr Treasury yield up to 1.65-1.68 per cent in the near term. Broadly we can expect the yield to remain in the range of 1.3-1.65 per cent for some time.