It was a volatile week for the global currency market. The major currencies made some wild swings after the US Federal Reserve meeting outcome on Wednesday. The Fed left the rates unchanged at 5.25-5.5 per cent. It made no change in its rate cut forecasts for this year. So, that keeps the door open for the central bank to increase the interest rates by a total of 75 basis points this year. However, the timing of this rate cut continues to remain uncertain.
The dollar index was beaten down badly after the Fed meeting outcome. However, later on Thursday, the greenback reversed sharply higher recovering all the loss. That in turn dragged the euro and the Indian rupee lower.
Rupee tumbles
The Indian Rupee (USDINR: 83.4250) traded weak all through the week. The fall accelerated on Friday and took the rupee to a low of 83.43 before closing at 83.4250 in the onshore market. The domestic currency is poised just below the all-time low of 83.48.
However, in the offshore segment, the rupee tumbled to a low of 83.69 and has closed at 83.51.
On the charts, 83.55 is going to be a very crucial level to watch. A strong break below it can drag the rupee lower to 84 in the coming weeks.
In case the rupee manages to reverse higher from around 83.55, it can test 83.35-83.30 initially. A further break above 83.30 can take the rupee up to 83.10-83.00. This recovery move is possible if the central bank intervenes at around 83.55 and arrests the fall.
Room to rise
The dollar index (104.43) sustained well above 103 and has risen sharply last week. Immediate resistance is at 104.50. A break above it can take the index up to 105-105.50 and even higher in the coming weeks.
The index has to decline below 104 to come under pressure for a fall back to 103.50-103 again.
Rupee watch
A break below 83.55 can take the rupee down to 84
Euro: Bearish
The euro (EURUSD: 1.0808) has declined breaking below the 1.0850-1.0835 support zone. A fall to 1.0760 looks likely now. A break below 1.0760 can drag the euro down to 1.0650-1.0630.
On the charts 1.0840-1.0880 will be a good resistance cluster. The euro has to breach 1.0880 to bring back the bullishness again.
Yields: Range bound
The US 10Yr Treasury yield (4.20 per cent) has come down failing to breach the resistance at 4.35 per cent. This leaves the near-term outlook unclear. A fall to 4.1-4 per cent looks likely now. Broadly, 4-4.35 per cent can be the trading range. A breakout on either side of 4-4.35 per cent will determine the next leg of move.
