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The dollar index rallied for the fourth consecutive week and is keeping intact the overall uptrend. The index has risen breaking above the resistance at 104. It closed the week at 104.25, up 0.74 per cent. A strong rise in the US Treasury yields is aiding the greenback to retain its strength. Markets turning slightly cautious ahead of the US Presidential Election next month is also giving the dollar a safe-haven support. The uptrend is strong, and we expect the rally in the dollar to continue for another couple of weeks until the outcome of the US elections is known.
Uptrend intact
The upmove in the dollar index (104.25) is strong and intact. Immediate support will be at 104. Below that 103 is the next strong support. Any fall below 104 will be limited to 103 as fresh buyers can come into the market.
The dollar index can rise to 105 from here. A break above 105 can take the index up to 106. The price action thereafter will need a close watch. A strong trigger will be needed to get a sustained rise above 106. As such a reversal from there can take the index down to 104-103 again. That will depend on the outcome of the US Presidential Election.
So, for now we expect the dollar index to rise towards 106 in the next couple of weeks and then turn down after the elections.
More rise
The US 10Yr Treasury yield (4.24 per cent) has risen well breaking above the resistance at 4.12 per cent as expected. Indeed, the yield has closed very well above the key level of 4.2 per cent. This is a very positive signal.
The outlook is bullish. Support is in the 4.2-4.17 per cent region. The US 10Yr Treasury yield can rise to 4.4-4.45 per cent in the coming weeks.
The price action thereafter will need a close watch. We can expect the yield to reverse lower again from the 4.4-4.45 per cent resistance zone.
Crucial support
As expected, the euro (EURUSD: 1.0796) fell breaking below the support at 1.08 last week. The currency touched a low of 1.0761 and then has bounced slightly from there.
The crucial support at 1.0750 is holding well for now. That keeps the chance alive for a corrective bounce to 1.09-1.0950 in the near term. However, the broader trend is down. As such a rise beyond 1.0950 will be difficult.
As such we can expect the euro to see a fresh leg of fall from around 1.09-1.0950 towards 1.07-1.06 going forward.
Gone nowhere
The Indian rupee (USDINR: 84.08) did not go anywhere last week. The domestic currency was stuck inside 84.05-84.08, a narrow 3-paise range all through the week.
The expected trading range for the rupee will still be 84-84.10. The currency can remain stuck within this range for some more time.
The bias is negative. As such we can expect the rupee to break 84.10 and fall to 84.40 in the coming weeks.
Rupee has to breach 84 in order to see a recovery towards 83.90-83.80.
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