The dollar index managed to recover slightly after having fallen a week earlier. However, on the chart, it looks like the green back is range-bound over the last couple of weeks. The US 10Yr Treasury Yield is also stuck inside a range over the last four weeks. Broadly, for the dollar, the downtrend is intact. On the other hand, the 10Yr Treasury yield remains mixed and unclear.
However, the rupee on the other hand, witnessed a sharp fall last week. Rise in crude oil prices on the back of the ongoing Israel-Iran conflict is weighing on the domestic currency.
A non-event
The US Federal Reserve meeting last week largely turned out to be a non-event for the currency market. The Fed kept the rates unchanged at 4.25-4.5 per cent. It also retained its forecast for another 50-basis points rate cuts for the rest of the year.
However, the central bank had revised its inflation forecast higher. The Personal Consumption Expenditure (PCE), the Fed’s inflation gauge, is projected to be at 3 per cent in 2025. In March the Fed had a forecast of 2.7 per cent for the PCE. The higher revision has been attributed to the uncertainty prevailing over the impacts of higher tariffs.
Dollar forecast
The trend is down for the dollar index (98.71) and the view remains the same. Resistances are at 99.80 and 100.50. Outlook is bearish to break 98 and fall to 96.
We reiterate that from a long-term perspective, 96 is a strong support. The downtrend can halt there, and the dollar index can see a fresh rise towards 100 and higher thereafter.
Support holds
The euro (EURUSD: 1.1523) is bouncing back after falling to a low of 1.1446. So, the support at 1.14 is holding well as expected. That keeps intact our bullish view to break 1.16 and see a rise to 1.18 in the coming weeks. As mentioned last week, there can be an extended rise to 1.20 as well.
The euro has to decline below 1.1350, a lower support, to come under pressure for a fall to 1.12-1.11.
Range-bound
The US 10Yr Treasury Yield (4.37 per cent) is stuck between 4.3 and 4.55 per cent over the last four weeks. Although there is a range on the weekly chart, the price action on the daily chart leaves the bias negative. As such the chances are high for the 10Yr yield to break the range on the downside below 4.3 per cent. Such a break can drag the 10Yr Treasury Yield down to 4.1 per cent.
Rupee weakens
The fall to 86.60 on the Indian Rupee (86.59) has happened much faster than expected. The domestic currency fell to a low of 86.89 before closing the week at 86.59 against the dollar.
If the rupee manages to sustain above 86.70, a recovery towards 86.30 and 86 is possible in the near term. In that case, a sideways consolidation between 86 and 86.70 is also a possibility for some time.
However, from a big picture, as long as the rupee stays below 86, there are good chances for it to revisit 88 levels in the coming months.
Published on June 21, 2025