The US Treasury yields and the dollar index have been very volatile over the last couple of weeks. However, both have been stuck inside a broad range and are continuing to oscillate within it. Earlier this month, the US Federal Reserve left the interest rates unchanged at 5.25-5.5 per cent. Market is now expecting the Fed to keep the rates unchanged in its next meeting in December also. But according to the projections released by the Fed in September, there is still room for another 25 basis points rate hike. So, broadly the sentiment is mixed. That can continue to keep the currency market inside their range for some more weeks.

Range bound

The dollar index (105.86) has been range bound between 104.85 and 107.35 for more than a month now. Looking at the price action on the short-term charts, the bias is slightly negative for the near term. As long as the index trades below 107, there are chances for it to break 104.85 and fall to 104 in the near term. A strong rise past 107.35 is needed to indicate the resumption of the uptrend. That will take the index up to 108.

For now, the 104.85-107.35 range is intact. The index can go either way within this range.

Room to rise

The US 10Yr Treasury yield (4.65 per cent) has been oscillating between 4.47 per cent and 5.02 per cent over the last six weeks. Apart from the range support, another important trendline support is at 4.4 per cent. So, the outlook will turn bearish only if the 10Yr Treasury yield breaks below 4.4 per cent. Such a break can drag the yield down to 4.1 per cent. But that break and fall would need some trigger.

So, for now, the 4.47-5.02 per cent range is likely to remain intact. We can expect the 10Yr Treasury yield to rise within this range towards 4.85-4.9 per cent in the coming weeks.

Resistance ahead

The euro (EURUSD: 1.0686) has a crucial resistance at 1.08. We expect it to cap the upside and trigger a reversal again towards 1.05-1.04 in the coming weeks. A break below 1.0650 can trigger this fall.

The bearish view will go wrong only if the euro breaks above 1.08 decisively. Such a break can take the currency up to 1.10-1.11.

Rupee watch
The 83.00-83.30 range is intact. But, the bias on the chart is negative for the rupee to see a sustained fall below 83.30 in the coming weeks
Waiting to breakout

Barring the short-lived spike to 83.47 on Friday, the India Rupee (USDINR: 83.34) remained well within the 83-83.30 range. The domestic currency has closed slightly below this range at 83.34.

The immediate outlook is mixed. Intermediate resistance is at 83.20. A break above it can take the rupee up to 83.10-83.00 in the coming days.

As seen from the charts, the broader picture remains weak for the rupee. As such, we expect the rupee to stay below 83 going forward. It is likely to see a sustained fall below 83.30. That will drag the Indian rupee lower to 84-84.50 going forward. In that case, the rupee will come under huge selling pressure and will be in a danger of weakening even towards 85 over the medium term.

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