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The dollar index was knocked down badly last week. Indeed, it fell below the psychological mark of 100 on Friday to hit 99.01, the lowest level seen since July 2023. However, it has managed to rise back from this low and close the week at 100.10. The ongoing tariff war, expectation for more rate cuts from the US Federal Reserve are all weighing on the greenback.
The fall below 100.50 in the dollar index (100.10) is very significant. The price action this week is going to be very important. A strong and sustained rise back above 100.5 is needed to ease the downside pressure. Only then a rise to 102-102.50 can be seen.
Failure to breach 100.50 can continue to keep the index under pressure. In that case, a test of 98.65, the next key support can be seen. A break below 98.65 will then increase the danger of the index tumbling towards 96 in the coming weeks.
The US 10Yr Treasury Yield (4.49 per cent) witnessed a strong surge last week. From a low of 3.87 per cent, the yield spiked to a high of 4.59 per cent. It has risen decisively above the 4.4-4.45 per cent resistance zone. That leaves the outlook bullish. There is room to rise more.
The 10Yr Yield can rise to 4.65-4.7 per cent first from here. A break above 4.7 per cent can then take it further higher to 4.85 per cent.
The 10Yr Yield has to fall below 4.35 per cent again to negate the above-mentioned rise.
The euro (EURUSD: 1.1355) has made a bullish breakout above the key resistance level of 1.12. Strong support is now in the 1.12-1.1150 region. As long as the currency sustains above this support, the bias will remain positive. As such the euro has potential to see 1.16 initially and even 1.20 on the upside over the long term.
The potential for a rise to 1.20 on the euro indicates that the dollar index can get beaten down further badly.
The Indian Rupee (USDINR: 86.05) declined sharply below 86 last week contrary to our expectation. Last week, we had said the rupee can oscillate in a range of 84.90-86.
The domestic currency fell to a low of 86.71 and recovered in the second half of the week. It closed the week at 86.05 in the onshore segment and slightly lower at 86.16 in the offshore market.
On the charts, 86.70 is a good support for the rupee. That seems to have held very well. Resistance is at 85.85. If the rupee manages to break this resistance, it can strengthen back to 85 in the short-term.
On the other hand, failure to breach 85.85 can keep the rupee in a range of 85.85-86.70 for some time. A strong break below 86.70 is needed to bring the rupee under more pressure. If that happens, rupee can fall to 87.30-87.50
Published on April 12, 2025
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