Currency Outlook: Dollar at a very crucial support bl-premium-article-image

Gurumurthy KBL Research Bureau Updated - August 17, 2024 at 07:01 PM.

The dollar index is struggling to get a strong follow-through rise. The strong bounce from the low of 102.27 last week failed to sustain. The index had turned down sharply from around 103.2. It closed the week on a negative note at 102.46, down 0.65 per cent.

Crucial support

The dollar index (102.46) has a very crucial support at 102. The index has to sustain above it and bounce back in order to avoid a steep fall. A bounce from around 102, can take the index up to 103-103.50 again. In that case, 102-103.50 can be the trading range for some time.

If the dollar index breaks below 102, it will be very bearish. Such a break can drag the index down to 101-100.

The region between 103.50 and 104 is a key resistance. The dollar index has to breach 104 to turn the sentiment positive. Unless that happens, the above-mentioned fall to 101-100 cannot be avoided.

Bearish bias

The US 10Yr Treasury yield (3.88 per cent) sustained well below the 4 per cent mark last week. The immediate outlook is unclear. There is a cluster of resistances in the 4-4.1 per cent region. The yield has to rise above 4.1 per cent to become bullish for a rise to 4.3 per cent and higher.

As long as the yield remains below 4.1 per cent, the bias will remain bearish. A fall to 3.6-3.5 per cent can be seen in the coming weeks. A break below 3.8 per cent can trigger this fall.

For now, the yield can oscillate in a range of 3.8-4.1 per cent for some time with a bearish bias.

Momentum gains

The euro (EURUSD: 1.1027) surged, breaking above the key resistance level of 1.0950 last week. The region between 1.0950-1.0930 will now act as a good support. A fall below 1.0930 will now be needed to bring the euro under pressure for a fall again.

The outlook is bullish now. The euro can rise to 1.11-1.12 in the short term. If it manages to breach 1.12, the upside can extend up to 1.1280-1.13.

The price action in the 1.12-1.13 region will need a close watch. Failure to breach 1.13 and a reversal from there can drag euro down to 1.10 and lower again over the medium term.

Rupee watch
Rupee can be range bound between 83.80 and 84 for some time with a bearish bias to break and fall below 84 eventually
Narrow range

The Indian rupee (USDINR: 83.95) did not go anywhere last week. The domestic currency was stuck in a narrow nine-paise range (83.89-83.98) all through the week. There is no change in the view.

Support is around 84 and resistance is at 83.80. So, broadly 83.80-84 can be the trading range for some time now. Within this range, the bias is negative. We can expect the rupee to break below 84 eventually. Such a break can drag the rupee down to 84.50-84.70 in the coming weeks.

As it has been happening recently, the above-mentioned fall to 84.50-84.70 can happen very gradually.

Published on August 17, 2024 13:31

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