It was a volatile week for the currency market. The dollar index was knocked down badly after the US President Donald Trump announced the tariffs on Wednesday. Fear of the US running into recession triggered a sharp fall in the US Treasury yields. That in turn dragged the greenback lower. The dollar index fell to a low of 101.27. However, it has managed to recover on Friday and close the week at 103.
Dollar outlook
The trend is down. The dollar index (103) has an immediate resistance at 103.20. Above that 104-104.50 is the next strong resistance zone which can cap the upside if there is a rise above 103.20. A rise beyond 104.50 looks less likely for now. We expect the dollar index to fall to 100.50 in the short term.
The level of 100.50 is an important support. The price action around it will need a close watch. A bounce from there may have the potential to take the index up to 103-104 again.
Bearish breakout
The US 10Yr Treasury Yield (3.99 per cent) broke below the key support level of 4.1 per cent and tumbled to a low of 3.86 per cent last week. From there it rose back on Friday to close the week at 3.99 per cent. The fall to 3.8 per cent mentioned last week has almost happened and much faster than expected.
The outlook is bearish. Strong resistance is at 4.1 per cent which can cap the upside from here. We expect the 10Yr Yield to fall back to 3.7 and 3.6 per cent in the coming weeks.
Range-bound
The rise to 1.11 on the euro (EURUSD: 1.0956) has happened much faster than expected. The euro touched a high of 1.1144 and has come off sharply from there. Support is in the 1.09-1.0850 region. We expect this support to hold and the euro to bounce back towards 1.1150-1.1180 in the short term.
There are good chances to see the euro oscillating in a range of 1.0850-1.12 for a few weeks now.
Resistance holds
As expected, the Indian rupee (USDINR: 85.24) rose to test the 85-84.90 resistance zone last week. The domestic currency made a high of 84.95 and then fell back from there to close the week at 85.24 in the onshore market. The rise in the dollar has dragged the rupee more in the offshore segment. Rupee closed at 85.48 against the dollar in the US session on Friday.
Rupee may have to breach 84.90 in order to strengthen further towards 84.60-84.50. Failure to break 84.90 can keep the domestic currency in a broad range of 84.90-86 for a few weeks.
Published on April 5, 2025
