Mixed outlook for currencies, lack of momentum seen in dollar index and 10Yr Treasury yield
As expected, the currencies seem to have entered a sideways range. The dollar index continued to hold steady, range-bound for the second week in a row. Looks like some new trigger is needed to go either way from here. The Dollar Index managed to hold above 102. But at the same time, it seems to be lacking the momentum to see a sustainable rally above 103.
On the data front, US jobs data is due out on Friday this week. Therefore, until then, in the absence of any unexpected events, the dollar index can continue to stabilize above 102. The general outlook for the dollar continues as mentioned last week.
mixed look
The trading range in the dollar index (102.51) has been narrowed to 102-103. A breakout on either side of this range will determine the next move. A break above 103 will give the index some relief. Such a break could reach 104-104.50 in the near term. Continuous rise after 104.50 could consolidate the bullish momentum. In this case, the path will be cleared for the dollar index to test 106-107 on the upside.
On the other hand, a break below 102 could push the index down to 101. A further drop below 101 would be bearish to see 100 and lower levels.
lacks momentum
The 10-year US Treasury yield (3.38 percent) appears to lack a strong follow-up to a rally above 3.6 percent. Right now, 3.28-3.65 percent seems to be the trading range. Within this, the price action on the daily chart suggests that the yield could drop towards 3.28 percent – the lower end of the range. Bias is still weak. The 10-year Treasury yield seems likely to break 3.28 percent and fall to 3.2-3.18 percent initially and then to 3.1 percent. After that, a new rebound is possible. A sustained rise beyond 3.65 percent would be required to avoid the aforementioned drop.
bearing resistance
The Euro (EURUSD: 1.0839) faced resistance near 1.0930 for the second week in a row. The coin rose to 1.0926 and took off from there. Immediate support is located at 1.0815. A break below could take the Euro to 1.0750-1.0700 this week. A strong break above 1.0930 is needed to lift the coin to 1.10-1.11.
Obstacles ahead
The Indian Rupee (USDINR: 82.18) appears to be gradually rising. The coin fell to 82.42 initially, but then managed to recover nicely from there. It closed the week at 82.18.
The main resistances are at 82 and 81.90. If the rupee can break above 81.90, it can strengthen to 81.70-81.60 this week. This will also keep the doors open for the local currency to test 81.50-81.30 as well.
Failure to break the resistance of 81.90-82 could keep the rupee in the range of 81.90-82.40 for some time.