By laksh5382 
The dollar index managed to remain at a higher level throughout the last week. A strong rise in US Treasury yields helped the greenback maintain its strength. US 10-year Treasury yields rose above 4 percent last week and closed on a strong note at 4.1 percent.
data watch
US inflation data came in slightly higher than market expectations. The US headline consumer price index (CPI) rose 2.41 percent (year-on-year) in September. The market expected CPI to increase by 2.3 percent. Due to this, expectations of rate cut by 50 basis points next month have reduced in the market.
However, the inflation figure was lower than the 2.59 per cent rise seen a month ago. Therefore, the broad trend of downward inflation in the US continues. In such a situation, the US Federal Reserve will probably continue its rate cuts at a slow pace.
dollar outlook
The dollar index (102.89) remains bullish. Support lies at 102.25 and then in the 102-101.75 area. Our view of seeing a rise to 103.50-104 outlined last week remains intact. After that a short-term corrective decline to 103 is likely before the rise resumes.
As reported last week, from the bigger picture, the dollar index may now have the potential to target 105-105 in the medium term.
resistance forward
The US 10-year Treasury yield (4.10 per cent) has risen sharply by more than 4 per cent last week. There is scope for a rise and test of the 4.15-4.20 percent resistance zone this week. Whether yields manage to rise above 4.2 per cent will decide the next step.
A break above 4.2 percent could take yields to 4.3 percent and above. On the other hand, a change from 4.2 per cent could bring the yield down again to 4-3.9 per cent. This in turn will perpetuate the broader decline.
support continues
The euro (EURUSD: 1.0937) fell to 1.09 last week as expected and then bounced back slightly. Immediate resistance lies at 1.0980. The Euro must overcome this hurdle and then get a strong follow-up rise to reduce the downside pressure. Only then will the doors for gains to 1.1050-1.1100 open.
Failure to break 1.0980 could leave the euro vulnerable to breaking 1.09. Such a break could take the currency down to 1.0850-1.08.
The European Central Bank (ECB) meeting on Thursday will be an important event to watch.
vital support
The Indian Rupee (USDINR: 84.07) fell below 84 last week as per our expectation. The domestic currency touched a low of 84.09 before closing the week at 84.07.
An important support is at 84.10 which will need to be kept a close eye on. A decisive break below 84.10 would be very bearish. Then it will pull the rupee down to 84.30-84.40 in a week or two.
On the other hand, if rupee manages to hold above 84.10 and break above 84, it may get relief. In such a situation, the rupee can stabilize at 83.90-83.85.
Right now it is a wait and see situation. But looking at the broader picture, chances of the rupee falling below 84.10 are very high, if not immediately, but eventually.
rupee watch
If rupee breaks below the important support of 84.10, it may weaken to 84.30-84.40.