Currency Outlook: Dollar Retains Momentum

The dollar index has shown impressive strength, rallying for four consecutive weeks and maintaining a solid overall uptrend. Recently, it broke above the important resistance level of 104, closing the last week at 104.25, which represents a 0.74 percent increase. One of the main contributing factors to this momentum is the rise in US Treasury yields, which is supporting the dollar's strength. Additionally, market participants are displaying caution ahead of the upcoming US Presidential Election next month, providing further safe-haven support for the dollar.

Uptrend Remains Strong

The dollar index's recent uptrend appears robust and intact. Immediate support levels are established at 104. Should the index dip below this point, the next stronger support is anticipated at 103. Any decline past 104 is likely to be limited to this level, with fresh buyers expected to enter the market. Based on current momentum, the dollar index is poised to rise towards 105. A breakout above 105 could further lift the index to 106, however, reaching sustained levels above this mark will require close monitoring for a significant trigger. Conversely, a reversal from 106 may see the index decline towards the 104-103 range, a movement heavily reliant on the outcome of the US elections.

For the immediate future, we predict that the dollar index will progress towards 106 in the coming weeks, with the possibility of a downturn following the elections.

Further Gains Ahead

The US 10-Year Treasury yield, currently at 4.24 percent, has achieved a notable rise, having successfully broken above the previous resistance at 4.12 percent. This confirmation above the significant threshold of 4.2 percent offers a positive outlook. We expect the yield to find support in the 4.2-4.17 percent range and to potentially rise to 4.4-4.45 percent in the weeks ahead.

However, it will be essential to watch the price action closely beyond this range, as a reversal may be expected from the 4.4-4.45 percent resistance zone.

EUR/USD Trend Review

In the currency market, the euro (EURUSD: 1.0796) has experienced a downturn, slipping below the significant support level at 1.08 last week. The euro fell to a low of 1.0761 before showing a minor recovery. Currently, the crucial support level of 1.0750 is holding, allowing for a potential corrective bounce towards 1.09-1.0950 in the near term. Despite this possible bounce, the overall trend remains downward, making it challenging for the euro to surpass 1.0950.

An anticipated fresh decline is expected from around the 1.09-1.0950 range towards the 1.07-1.06 levels in the future.

Indian Rupee Stalemate

Looking at the Indian rupee (USDINR: 84.08), the currency has remained stable, fluctuating within a very narrow range of 84.05-84.08 throughout the week. The expected trading range for the rupee remains identified as 84-84.10, and it may continue to settle within this range for a while longer.

Considering the current bias, there is a negative outlook, and we might see the rupee potentially break 84.10, sliding towards 84.40 in the near future. For a recovery towards 83.90-83.80, the rupee must reverse below the 84 mark.

Conclusion

The overall uptrend in the dollar index remains strong, with potential for further gains anticipated in the coming weeks. These movements in the currency markets are all closely interconnected and developments will be watched closely, especially as we approach the significant events like the US elections.

Dollar, Yields, Election