Comments
The dollar was stable last week. The dollar index was stuck in a narrow range between 104 and 104.55 all through last week. However, the US 10Yr Treasury witnessed a sharp fall after the US Personal Consumption Expenditure (PCE) data was released on Friday. The US PCE – the Federal Reserve’s inflation gauge – rose 2.51 per cent (year-on-year), down from 2.6 per cent seen a month ago. A lower PCE number strengthens the case for a rate cut from the Fed.
The Fed meeting outcome is due this week on Wednesday. The market expects the central bank to leave the interest rate unchanged. It will be important to hear from the Fed Chairman Jerome Powell and if there is any hint from his side on the rate cut front. As of now, the market expects a rate cut in September.
Dollar outlook
The immediate outlook is unclear for the dollar index (104.32). The price action last week indicates that the market could be waiting to see the outcome of the Fed meeting. So, until then, the index can remain stuck inside the 104-104.55 range.
A breakout on either side of this range will determine the next move. A break above 104.55 can take the index up to 105 initially. A further break above 105 will then clear the way for the dollar index to see 106 on the upside in the coming weeks.
In case the index breaks the range below 104, a fall to 103 can be seen.
More fall
The sharp reversal towards the end of last week leaves the bias negative for the US 10Yr Treasury yield (4.19 per cent). The yield can dip to 4.1 per cent initially. A further break below 4.1 per cent can take the yield down to 4 per cent in the short term.
A fall beyond 4 per cent might not be very easy. It might need some strong trigger. We can expect the yield to rise back towards 4.2 per cent after seeing 4 per cent on the downside.
Support holds
The support at 1.08 on the euro (EURUSD: 1.0856) has held very well last week. The currency made a low of 1.0826 and then rose back slightly from there. Immediate resistance is at 1.0875. The euro has to break this resistance to go up to 1.0950-1.0970.
Support is in the 1.0820-1.08 region. A break below 1.08 can drag the euro down to 1.07.
Broadly, 1.08-1.0875 can be the trading range for now. A breakout on either side of this range will decide the next direction of move.
Rupee weakens
As expected, the Indian rupee (USDINR: 83.73) is weakening, but very gradually. The resistance at 83.60 is holding very well in line with our expectation. So, as long as the rupee stays below 83.60, the bias will remain negative. We can see the rupee gradually moving down towards 83.90-84 in the coming weeks.
A strong break above 83.60 is needed for the rupee to see a recovery. If that happens, then it can move up to 83.40 or 83.20. But such a move looks less likely at the moment.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.