The dollar index has been oscillating up and down within a range over the last three weeks. The US 10Yr Treasury yield, on the other hand, seems to be struggling to get a decisive break above the psychological 5 per cent mark. It looks like the market is waiting for some trigger to move either way from here. Can the US Federal Reserve meeting outcome on Wednesday provide that trigger in some way to set the tone for the market, going forward? We will have to wait and watch.
Market expects the Fed to leave the rates unchanged at 5.25-5.5 per cent. What the central bank hints for the future will be more important to watch.
Dollar outlook
The dollar index (106.56) has been stuck in between 105.35 and 106.9 over the last three weeks. This sideways range can remain intact for some more time. But, looking at the weekly chart, the bias is bullish. So, we can expect the dollar index to break 106.90 and rise to 108 in the near term.
The view will turn negative only if the index declines below 105. In that case, a fall to 104.50-104 can be seen.
Strong hurdle
The US 10Yr Treasury yield (4.83 per cent) has been struggling to breach the psychological 5 per cent mark. The yield touched 5.02 per cent last week and has come down from there.
The immediate outlook is mixed. Support is at 4.8 per cent. A break below it can take the 10Yr yield down to 4.7-4.6 per cent this week. On the other hand, a sustained break above 5 per cent can take the yield up to 5.1-5.2 per cent.
Broadly, 4.6-5 per cent can be the trading range for some time. A breakout on either side of this range will set the direction for next move.
Resistance holds
The resistance at 1.07 on the euro (1.0565) capped the upside last week as expected. The euro made a high of 1.0694 and has come down sharply from there. For now, 1.05-1.07 has been the trading range over the last few weeks.
The bias is negative. As such, we can expect the euro to break 1.05 if not immediately but eventually. Such a break can drag it down to 1.04 and even lower, going forward.
Mixed outlook
The Indian rupee (USDINR: 83.24) did not move up to 82.90 last week. Instead it remained below 83 and fell to close near the low of the week at 83.24.
The outlook is mixed. The possible trading range can either be 83.00-83.30 or 82.90-83.30. A breakout on either side of 82.90 or 83.30 will only give a clear cue on the next direction of move.
A break above 82.90 can take the rupee up to 82.70 and even 82.50. On the other hand, a break below 83.30 will be bearish to see 83.50 initially and then even 84 and lower levels eventually.
Considering the strength in the dollar index and weakness in the euro, preference will be to see the rupee weakening breaking below 83.30, going forward.