The US dollar remained volatile last week. The developments on the US debt ceiling deal weighed on the greenback for the most part of the week. The dollar declined as the debt ceiling deal got a pass-through last week. Strong jobs data release, on Friday, gave a breather for the dollar and pulled it up from the week’s low.
The US added 339,000 in its non-farm payroll in the month of May. This was much higher than the market expectation for a rise of 190,000 in the payrolls. The unemployment rate however showed a rise. It increased to 3.7 per cent in May from 3.4 per cent a month ago. Under this circumstance, it is going to be very interesting to watch the next Federal Reserve meeting. The outcome of this meeting will be on Wednesday next week, June 14.
Dip more
The dollar index (104.02) struggled to breach 104.50 decisively and fell sharply last week. Though it has bounced-back well on Friday, a strong rise past 104.50 is needed for it to bring back the bullishness. Only in that case, the rise to 105-106 will come back into the picture.
On the charts, it looks like the dollar index can dip further this week. 103-102.8 can be tested first. Thereafter a fresh leg of upmove can become targeting 105-106 on the upside.
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Mixed outlook
The US 10Yr Treasury yield (3.69 per cent) fell sharply last week. It fell to a low of 3.56 per cent on Thursday. However, on Friday, the yield has risen back recovering some of the loss. The near-term outlook is unclear. Immediate resistance is at 3.72 per cent. The yield has to break above this resistance to move up again to 3.8 and 3.9 per cent.
Failure to rise past 3.72 per cent can take the US 10Yr yield down to 3.6 and 3.5 per cent in the near term. The level of 3.5 per cent is a strong support which is likely to limit the downside for now.
Limited upside
As expected, the euro (EURUSD: 1.0723) fell breaking below the support at 1.07 last week. It made a low of 1.0635 and has risen back from there. Strong resistance is in the 1.08-1.0820 region which can cap the upside. The overall picture is still bearish. The euro can fall to 1.05 in the short term. As mentioned last week, 1.08-1.09 can be the cap on the upside.
Resistances ahead
As expected, the Indian Rupee (USDINR: 82.31) strengthened breaking above 82.50. It almost tested 82.25 in line with our expectation. The domestic currency made a high of 82.27 and has reversed lower to close the week at 82.31 against the dollar. In the off-shore segment, it has declined further to close at 82.40.
Series of resistances are at 82.25, 82.20 and 82.10-82.00. Support is at 82.50. If the rupee manages to sustain above 82.50, a test of 82.20-82.10 is possible this week. On the other hand, a break below 82.50 will see the rupee weakening to 82.70 again this week. So, it is a wait-and-watch situation for now.