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.
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.