A break of 46 can take rupee down to 47

The dollar index rallied from the demand level of 77. The level was hit last Friday leading to a bounce in the greenback.

Last week, we had identified weak support level for the dollar index at 77.50.

The index did respond at that level and rallied higher before selling off to reach the lower level of demand at 77.

A break of this level can take the index to the next level of support between 75.90 and 76. Our analysis shows that this level has lot of demand and can lead to a decent rally in the greenback.

It is, however, possible that the greenback might not fall further and continue to rally from the 77 level. The index closed at 77.28 on Friday.

US dollar-rupee
The rupee sold off after hitting a weak resistance area of 45.08. The pair did go a little below level before bouncing to nearly 45.50 and finally closing the week at 45.26.

The pair is clearly rangebound making price action as exciting as watching paint dry. The extreme support and resistance areas on the rupee are 46 and 43.85, respectively. A break of the 46 level can take the rupee down against the dollar to 47.

Euro-dollar
The pair hit a decent resistance level last Friday between 1.3825 and 1.3850 and sold off a bit. The pair is near a weak support level of 1.3732 and the next decent support level is at 1.3525 area. A break out of 1.3850 can take the pair all the way up to 1.42.

On the long side, most of the support levels nearby have been hit a few times making them weak. Our analysis shows that the best place to go long on the EUR-USD pair is in the 1.3290 level.

Australian dollar-US dollar
The Aussie is relatively stronger than the other pairs against the US dollar. On a fundamental level, the Australian offers a higher interest rate, making it an excellent carry trade. In a carry trade, people sell the low interest yielding currency, in this case the US dollar to buy the high-yielding currency the Australian dollar.

The pair has been forming strong support levels on the way up, making it difficult for bears to push it down much. But now AUD-USD is coming up to key resistance areas and it would be wise to take some profit on the pair. The resistance levels are in the 1.02 area followed by the 1.0250 level.

From the later area the pair had gapped down showing extremely high levels of supply. A gap is when the pair closes at one level at the end of the trading week and then opens at a different higher or lower level. These areas often tend to reverse trends, when prices come back to it as in the case of the Aussie now.

The writer is editor, www.capturetrends.com and based in Chicago