The dollar index began the week on a strong note by surging 1.5 per cent on Monday. But thereafter it lost steam and fell back to trade stable above 100.5. On the domestic front, the Indian rupee opened stronger on Monday following the India-Pakistan ceasefire announcement. However, it failed to sustain higher and fell all through the week, giving back all the gains.
Dollar index forecast
The dollar index (101.09) is at a crucial juncture now. There is support at 100.50 and 100. Resistance is at 101.50 and 102. If it manages to sustain above 100.50, then a rise to 102 is possible again this week. On the other hand, a break below 100.50 can take it down to 100.
Broadly, 100-102 can be the short-term trading range. A breakout on either side of this range will decide the next move.
A break above 102 will be bullish. It can take the dollar index up to 104. On the other hand, a break below 100 will keep the broader downtrend intact. It can then drag it down to 98-96.
As mentioned last week, 96 is a strong long-term support where the current downtrend can find a bottom.
Resistance ahead
The US 10Yr Treasury Yield (4.48 per cent) rose to test 4.55 per cent last week in line with our expectations. However, it failed to sustain higher and had come-off towards the end of the week.
The resistance at 4.55 per cent has held very well. Failure to bounce back from current levels can drag the yield down to 4.35-4.30 per cent, an important support zone. A break below 4.3 per cent can take it down to 4.2 per cent and even lower.
The region between 4.55 and 4.6 per cent is a strong resistance. The US 10Yr Treasury Yield has to breach 4.6 per cent to gain bullish momentum. Only then a rise to 4.8 per cent will come into the picture.
Support holds
The euro (EURUSD: 1.1163) fell breaking below the support at 1.1150 during the week. This was contrary to our expectation. Although it has risen back well from the low of 1.1065, there seems to be a lack of strength.
If the euro falls below 1.1070, then it will come under danger to see 1.0950 and even lower levels. A strong rise above 1.13 is now needed to ease the downside pressure and strengthen the bullish case for a rise to 1.15-1.16.
Limited downside
The Indian rupee (USDINR: 85.52) failed to sustain higher after opening with a wide gap-up on Monday. From a high of 84.64, the domestic currency fell to a low of 85.73 before closing the week at 85.52.
The near-term outlook is weak. The rupee can fall to 85.90-86 or even 86.10. However, a fall below 86.10 might not be easy as it is a strong support. We can expect the rupee to recover from around 86 towards 85 again.
Broadly, we can expect the rupee to oscillate between 85 and 86.10 for some time.
Published on May 17, 2025
