Currency Outlook: More Fall On The Cards For The Dollar 

The dollar index continues to remain under pressure. The index rose to a high of 100.48 but failed to sustain. It fell back sharply from there to close the week at 99.33. The US 10Yr Treasury Yield is also showing signs of weakness.

The Personal Consumption Expenditure (PCE) data release on Friday did not have any major impact on the dollar movement. The PCE came in at 2.15 per cent (year-on-year) for May, down from 2.3 per cent a month ago.

Dollar outlook

The resistance at 100.50 mentioned last week held very well. That keeps the bearish view intact for the dollar index to see 98 on the downside. A break below 98 can drag it down to 96.

We repeat that 96 is a strong trendline support which can halt the current fall. From a long-term perspective, there are good chances to see the dollar index rising back from around 96 towards 100 and higher.

To avoid the fall to 96, the dollar index has to sustain above 98 and rise above 100.50 and 102. But that looks less likely.

More fall

The US 10Yr Treasury Yield (4.40 per cent) has come down to test its support at 4.4 per cent. The price action on the chart looks weak. That leaves the chances high to see more fall from here. We expect the US 10Yr Treasury Yield to fall further towards 4.25 per cent in the short term. It will also keep the doors open for the yield to revisit 4 per cent on the downside eventually in the coming weeks.

Cluster of resistances are there in the 4.5-4.6 per cent region. A sustained rise above 4.6 per cent is needed for the yield to rise.

Bullish outlook

The euro (EURUSD: 1.1347) has risen back well from its low of 1.1210. That keeps the bias positive. Near-term resistance is at 1.1420 which can be tested this week. We expect the euro to break this resistance and rise to 1.16 in the short term.

Immediate support is at 1.1270. A break below it can take the euro down to 1.12 or even 1.1160. However, a fall below 1.1160 is less likely.

Supports ahead

The Indian rupee (USDINR: 85.58) began the week on a strong note. The domestic currency surged to a high of 84.78 on Monday. But it failed to sustain higher and fell continuously for the rest of the week giving back all the gains.

However, support is there at 85.70. The price action on the chart indicates that this support is holding well. Resistance is in the 85.20-85.15 region. We expect the rupee to break 85.15 and rise to 84.70.

Rupee will come under pressure for a fall to 86-86.10 only if it declines below 85.70.

Published on May 31, 2025