After a strong rally for four consecutive weeks, the Japanese Yen eased against the dollar last week. The Yen surged to a high of 141.70 against the dollar last week and then reversed lower.
It fell back to close the week at 146.60 against the greenback. That gave the dollar index some breather last week. The dollar index fell to a low of 102.16 and then rose back to close the week at 103.13.
Data watch
The US Consumer Price Index (CPI) inflation data release on Wednesday will be an important event to watch this week. A low inflation number will strengthen the case for the rate cut in September. That, in turn, can drag the dollar index lower again this week.
The US Federal Reserve had also hinted in its July meeting for a rate cut in September if the data supports.
Supports ahead
Yen (USDJPY: 146.60) has an immediate support at 147.80. Below that, 149-150 is the next strong support. A fall below 150 looks less likely as of now.
It might need some strong trigger to push the greenback higher. In the absence of any such trigger, the Yen can rise back again from the 149-150 support zone. That can take it up to 144-143 again in the short term.
A sideways consolidation between 144-150 is a possibility for some time now before the rise in the Yen gathers momentum again.
Limited upside
The dollar index (103.13) may have very limited room on the upside from here. The region around 104 will be a strong resistance, which can be tested in the near term.
A reversal from there can take the index down to 103-102 again. Broadly, a range of 102-104 can be seen for some time now.
Near-term fall
Barring the fall to 1.0881 on Thursday, the euro (EURUSD: 1.0917) broadly remained stable above 1.09 all through the week.
Strong resistance is around 1.0950. Failure to rise past this level can keep the currency vulnerable for a fall to 1.0880-1.0850 in the coming days.
A sustained rise above 1.0950 is needed for the euro to gain momentum and rise to 1.10-1.11.
Resistances ahead
The US 10Yr Treasury yield (3.94 per cent) has risen back sharply from a low of 3.66 per cent last week. Key resistances are at 4.03 per cent and in the 4.08-4.10 per cent zone. A rise above 4.1 per cent is less likely.
Support is at 3.85 per cent. We expect the US 10Yr yield to remain below 4.1 per cent and break the support at 3.85 per cent. Such a break can drag the yield down to 3.6-3.5 per cent in the coming weeks.
Rupee weakens
The fall to 84 in the Indian rupee (USDINR: 83.95) almost happened last week. The domestic currency fell to a low of 83.97 before closing the week at 83.95.
There is some support around 84. If the rupee manages to stay above it, it can recover slightly towards 83.80 or 83.75. In that case, a range of 83.75-84 can be seen for some time.
But eventually, the rupee is likely to decline below 84. That break will see the domestic currency weakening towards 84.50 and 84.80 against the dollar in the coming months.