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The US dollar index was stuck in a narrow range last week. The index oscillated around 102 all through last week. It looks like the greenback is struggling to find a specific direction of move. The index might need some trigger to break out of the current range and give a clear cue on the next move.
The US GDP growth number and the Personal Consumption Expenditure (PCE), the US Federal Reserve’s inflation gauge are the important data releases scheduled for this week that can influence the dollar movement.
The growth numbers will give a hint on the possibility of a recession in the US. On the other hand, the PCE data will give some cue whether the Fed will slow down its rate hike pace or will continue to remain aggressive.
Outlook unclear
The 101-103 range on the dollar index (101.82) remains intact. Within this, the index was stuck in a narrow range between 101.50 and 102.25 last week. The immediate outlook is unclear. The index can go either way from here within the 101-103 range.
A breakout on either side of 101-103 will determine the next leg of move. A break above 103 will give some breather for the dollar index. It will take the index up to 104 or even 105. On the other hand, a break below 101 and a subsequent fall below 100.50 will increase the downside pressure. In that case the dollar index can fall to 98.
Bullish sign
The US 10Yr Treasury yield (3.57 per cent) was stuck in a sideways range last week between its support at 3.50 per cent and resistance at 3.65 per cent. The near-term outlook is mixed. A breakout on either side of 3.5-3.65 per cent will decide the next leg of move.
A break below 3.5 per cent will be bearish. It can drag the 10Yr yield down to 3.4 per cent initially. A further break below 3.4 per cent will open the doors to revisit 3.3-3.25 per cent on the downside.
On the other hand, a strong break above 3.65 per cent will strengthen the upside momentum. It can then take the yield up to 3.9-4 per cent again. Looking at the weekly chart, the bias is positive and inclined to see a break above 3.65 per cent and a rise to 4 per cent. We will have to wait and watch.
Support holds
The euro (EURUSD: 1.0986) sustained well above its support at 1.09 last week. The currency made a low of 1.0909 and has moved up gradually. As long as the euro stays above 1.09, the short-term outlook is bullish. The currency can break 1.10 and rise to 1.11 and even 1.1250 in the coming weeks.
As mentioned last week, the euro will come under pressure only if it breaks below 1.09. Such a break can take it down to 1.07 and lower.
Mixed signal
The India rupee (USDINR: 82.10) fell to a low of 82.25 and has managed to recover from there. It has closed the week at 82.10 in the onshore market and 82.03 in the offshore segment.
The support at 82.25 continues to hold well. But there is resistance at 81.90 and 81.70. Although the bias is positive as long as the rupee stays above 82.25. a break above 81.90 is needed to strengthen the bullish case. In that case 81.70 can be tested initially. That will keep the doors open to test 81.50 and higher levels, going forward.
On the other hand, rupee will come under pressure on a break below 82.25. That can drag the domestic currency down to 82.40 and 82.55.
Broadly, 81.90-82.25 can be the near-term trading range. A breakout on either side of this range will give clarity on the next move.
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