Global 360: Can rupee strengthen further?

The dollar index remained broadly stable In a sideways range last week. 104-105.35 was the trade range. Interestingly, there was little difference seen last week between the US in 10 years Treasury returnAnd the dollar index and the Indian rupee last week.

Barring Friday’s sharp drop, the 10-year yield continued to remain strong and has already risen above 4 percent as expected. However, that did not push the dollar index much higher. So, if the yield extends lower next week, that could be negative for the dollar. Also, the Indian Rupee continued to strengthen last week as the Dollar Index remained flat.

For the coming week, the US Nonfarm Payrolls and Unemployment Rate are important data to watch. They will be released on Friday. Inflation data, due for release next week, is also very important.

mixed look

Last week’s price action left the short-term outlook for the Dollar Index mixed (104.52). Support is at 104. Resistance is at 105.50 and 106. So, a wide range of 104-106 is a possibility for some time. A breakout on either side of 104-106 will define the next phase of the move.

A break above 106 would be bullish and could see 108 on the upside. On the other hand, if the dollar index falls below 104, it could drop to 102 and even lower levels.

Crucial support

The 10-year US Treasury yield (3.95 percent) broke 4 percent last week and reached a high of 4.09 percent. But then it fell sharply on Friday, closing at 3.95 percent.

An important support is 3.9 percent. Ten years above this support must continue to maintain chances of a rally back above 4 percent again. Resistance is in the region of 4.05-4.10 percent. A breakout above 4.1 percent could lift the yield to 4.2-4.25 percent.

On the other hand, if the 10-year Treasury yield falls below 3.9 percent, it can drop to 3.75-3.7 percent.

bound scope

The Euro (EURUSD: 1.0635) stalled between 1.0530 and 1.07 for the second week in a row. The immediate prospects are unclear. A breakout on either side of the current range will determine the next move.

A break below 1.0530 could take the Euro down to 1.05-1.0480 – the next important support area. Failure to bounce from around 1.0480 could drag the currency further down to 1.04 and then a reversal is possible.

On the other hand, a strong break above 1.07 could relieve the bearish pressure. Such a break could lift the euro to 1.09.

More reinforcement

The Indian Rupee (USDINR: 81.97) remained strong throughout the week. The local currency has been on the upswing since the beginning of the week and the upward movement accelerated on Friday.

The coin closed above 82 at 81.97 in the local market. On the outside, however, the rupee strengthened sharply, closing at 81.68. So the chances of the Indian Rupee opening are very high with a wide gap on Monday in the onshore sector.

Overall, the 81-83 range appears to be still intact. As such, we could see the rupee strengthening towards 81.10-81.00 and even 80.80-80.75 in the short term. Then, it can be reversed. The supports are located in the region of 82.15-82.25.

81.00-80.75 is a strong resistance area. A strong catalyst may be required for the rupee to consolidate thereafter.