The US dollar index continued to move up for the third consecutive week. High risk-aversion in the market after the Fitch Ratings downgrading the US debt rating triggered a strong sell-off in risky assets. That aided the greenback to move up last week. However, the jobs data release on Friday, that failed to meet the market expectation, dragged the dollar index from its high. The US non-farm payroll increased by 187,000 in July as against the market expectation for an increase of 200,000.

The US Consumer Price Index (CPI) inflation data release on Thursday this week will be important to watch. A low inflation number will increase the speculation in the market for the US Federal Reserve to pause in its next meeting in September.

Dollar outlook

The resistance at 103 is holding well. The dollar index (102.02) has come down from the high of 102.85 last week. Supports are at 101.50 and 101. Broadly, 101-103 can be the trading range for this week. A breakout on either side of 101 or 103 will determine the next move.

A break above 103 can take the dollar index up to 103.50-104. On the other hand, a break below 101 can turn the outlook bearish. Such a break can take the index down to 100.50 and 100 again.

Yields mixed

The US 10Yr Treasury yield (4.03 per cent) surged to a high of 4.20 per cent, but then fell giving back most of the gains after the jobs data release on Friday. Support is at 4-3.98 per cent. If the yield sustains above this support and moves above 4.1 per cent, it can rise back to 4.2-4.3 per cent again.

On the other hand, a break below 3.98 per cent can drag it to 3.85-3.8 per cent.

Support holds

The support at 1.09 on the euro (EURUSD: 1.1006) mentioned last has held well as expected. The currency made a low of 1.0912 and has risen back well from there. As long as the euro stays above 1.09, the chances are high for the euro to move up to 1.1180-1.12 in the short term. Intermediate resistance is at 1.1070. A break above it can trigger the above-mentioned rise.

In case the euro declines below 1.09, it can fall to 1.08 – an important support. The outlook will turn bearish only if the euro breaks below 1.08.

Rupee watch
Rupee can recover to 82.50-82.35 while it sustains above 82.90
Range support

The Indian Rupee (USDINR: 82.84) fell last week as expected. Indeed, the domestic currency fell well beyond the mentioned level of 82.80. It made a low of 82.85 before closing the week at 82.84 in the onshore market on Friday.

However, the sharp fall in the dollar index on Friday after the jobs data has aided the rupee to recover in the offshore segment. The rupee has closed higher at 82.67 in the offshore market. This could aid the rupee to open with a gap-up on Monday in the onshore market.

The support at 82.80-82.90 region has held very well. As long as the rupee stays above this support, it can recover towards 82.50-82.35 and even 82.20 in the short term. That will keep the 81.50-83 range intact.

In case the rupee breaks below 82.90, it will come under pressure for a fall to 83.20-83.30.

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