The dollar index was stable and range-bound all through last week. The index oscillated between 98.35 and 99.45. The US 10Yr Treasury Yield on the other hand surged from its low of 4.31 per cent on Friday recovering all the loss. The trigger for this rise came from the US jobs data. The dollar index also rose but well within its narrow range.
The non-farm payroll in the US increased by 139,000 in May. Market expectation was to see an increase of 125,000. The unemployment rate in the US, however, remained unchanged at 4.2 per cent.
For the coming week, the Consumer Price Index (CPI) data release on Wednesday will be important to watch. A lower CPI number will be negative for the yields and the dollar index as it will keep hopes high in the market for the US Federal Reserve to cut rates.
Dollar index outlook
The trend remains down. The dollar index (99.19) has resistance at 99.80 and then at 100.50-100.75. As such the upside is likely to be capped.
The short-term outlook remains bearish. The dollar index can fall to 98 initially and then to 96 eventually in the coming weeks.
We reiterate that 96 is a strong long-term trend support. The current downtrend can halt there. A fresh rise from around 96 can take the dollar index up to 100 and higher over the long term.
Resistance ahead
The strong rise on Friday has given some relief for the US 10Yr Treasury Yield (4.51 per cent). If the momentum sustains, there are good chances of seeing a rise to 4.6 per cent this week. However, 4.6-4.65 per cent is a good resistance zone which can cap the upside. We expect the 10Yr Yield to reverse lower again from this resistance zone and fall back to 4.4-4.35 per cent.
In case the yield manages to breach 4.65 per cent, there can be an extended rise to 4.75 per cent and then a reversal can happen.
Range-bound
The euro (EURUSD: 1.1397) oscillated around 1.14 in a narrow range all through last week. The price action indicates that the currency is struggling to get a strong follow-through rise above 1.14.
Support is there in the 1.1350-1.13 region. As long as the euro stays above 1.13, the bias will remain positive. So, a sustained break above 1.14 can take the euro up to 1.16 in the short term.
Mixed outlook
Contrary to our expectation to break the resistance at 85.15 and rise, the Indian rupee (USDINR: 85.64) fell last week. The domestic currency touched a low of 86.02 and is managing to hold above 86.
The immediate outlook is mixed. The rupee can oscillate in a range of 85.50-86 (narrow) or 85.40-86.10 (broad) range for now. A breakout on either side of 85.40 or 86.10 will then determine the next move.
A break above 85.40 can take the currency up to 85.10-85. On the other hand, a break below 86.10 will be bearish. Such a break can drag the rupee down to 86.50 and even lower going forward.
Published on June 7, 2025
