The previous week saw the dollar index making a comeback, recording a 0.94 per cent increase after three weeks of decline. Despite this rise, the US 10Yr Treasury yield witnessed a sharp fall, creating a notable divergence between the two. The upcoming week is poised to bring key data releases, including the ECB’s interest rate decision and the US job numbers and unemployment rate data. These events are expected to keep the currency market volatile.
The outlook for the dollar index remains uncertain, as it managed to rebound from its low of 106.12 to 107.61. The potential for a drop to 105.50-105 still exists, with a strong push above 108 needed to negate this decline and pave the way for a revisit to 110 levels. Failure to breach 108 could lead to a retest of 107-106 levels. The movement of the dollar index in the coming days will provide further clarity on its direction.
On the other hand, the US 10Yr Treasury Yield plummeted below the crucial support level of 4.25 per cent, signaling a negative outlook. Resistance is now expected between 4.25 and 4.3 per cent, with potential downside targets at 4.1 and 4 per cent in the short term. A sustained rise above 4.3 per cent is necessary to alleviate the downward pressure and target a move back to 4.5 per cent.
The euro faced a sharp decline last week, abandoning the projected rise to 1.0650 and retaining the 1.0170-1.0550 range. Within this range, a bearish bias suggests a potential decline towards 1.03-1.02 in the near future. A breakout beyond 1.0550 or below 1.0170 will provide clarity on the euro’s next trajectory.
In terms of the Indian rupee, it weakened swiftly to 87.51, breaching the anticipated consolidation range of 86.45-87. The bearish sentiment persists, with key resistances at 87.25 and 87. A move towards 88 is likely, contingent on central bank intervention. Failure to hold above 88 could see the rupee test lower levels at 88.50-89. Overall, the rupee is expected to trade within the 86-88 range, with the central bank’s actions influencing its trajectory.
