The dollar index is struggling to rise back above the psychological mark of 100. That is very clear from the price action all through last week. It also keeps the greenback vulnerable to further fall in the coming days. Meantime, the Indian rupee recovered well last week in line with our expectation. A subdued dollar helped the rupee to gain ground.
The US Treasury yields have also come down, giving away some of the gains made in the previous week. Overall, the picture continues to remain weak for the dollar index.
index outlook
The dollar index (99.23) remains bearish. The region between 100 and 100.50 is acting as a strong resistance and capping the upside very well. That keeps intact our initial bearish view of the index falling to 98.50. A break below 98.50 can drag the dollar index down to 96 over the medium term.
A strong break above 100.50 is needed to ease the downside pressure. That will trigger a corrective rise to 102-102.50. However, the downtrend will persist. To get a trend reversal, the dollar index has to breach 102.50. But that looks unlikely at the moment.
Yields mixed
The US 10Yr Treasury Yield (4.32 per cent) came down last week. This was contrary to our expectation to see a rise. The immediate outlook is mixed. Support is at 4.2 per cent and resistance is at 4.4 per cent. A breakout on either side of 4.2-4.4 per cent will determine the next move.
A break below 4.2 per cent can drag the yield down to 4.1-4.0 per cent. On the other hand, a break above 4.4 per cent will be bullish to see 4.7 per cent initially and then 4.85 per cent eventually.
Euro bullish
The euro (EURUSD: 1.1393) is managing to hold well above 1.1250. Though the daily chart indicates a range, the weekly chart looks bullish. Euro can rise to 1.16 initially. A break above 1.16 will boost the bullish momentum and will take the currency up to 1.20 in the coming months.
A fall to 1.1150 will come into the picture only if the euro declines below the support at 1.1250.
Rupee forecast
The Indian Rupee (USDINR: 85.38) witnessed a strong recovery last week. The domestic currency broke the resistance at 85.85 and rose to a high of 85.35. It has closed the week at 85.38. The view remains positive. Support is at 85.70 which can limit the downside for now. The rupee can strengthen further towards 85.10-85 in the short term.
It is important to see if the rupee is managing to breach the crucial 85.00-84.90 resistance zone or not. If it does, then the rupee can rise to 84.60.
The price action around 85 will need a close watch going forward.
Published on April 19, 2025
