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FUNDAMENTALS OF CURRENCY:

* WEEK AHEAD: It will be a busy week, with the US jobs report and worldwide manufacturing and services PMIs providing an update on the economic recovery as well as supply constraints and price pressures. Other important releases include GDP figures for India, Brazil, Australia and Canada, monetary policy decisions from the RBA and the RBI, and inflation for the Euro Area.

* The dollar index could not sustain its early momentum after a surge in the PCE index, moving away from a two-week high of 90.44 to bottoming around the 90 neighbourhood. The Fed's preferred inflation measure jumped to 3.1% in April, the highest since the 1990s, beating market forecast. Earlier this week, initial claims fell to a fresh pre-pandemic low, pointing to a continued recovery in the labour market. Given the above and the fact that the US economic outperformance narrative seems entirely priced in, it is unlikely that the greenback will attract fresh buying in the medium term.

* The euro traded around $1.22 at the end of May, not far from an over four-month high of $1.2265 hit on May 25th, supported by solid economic recovery hopes across the bloc as vaccinations gather pace allowing authorities to ease restrictions and economic activity to accelerate. The latest data showed Eurozone economic sentiment improved to a 3-year high in May, with the strongest gains in services, retail and among consumers. Earlier, flash PMI data suggested the Eurozone, UK and US expanded all at record rates, following the relaxation of coronavirusinduced restrictions.

U S DOLLAR INDEX

Technical indicators (Daily):

* RSI- 27.4083

* MACD- -0.3641

* MOVING AVERAGES (20,50,100)- (73.2095/73.7115/73.2965)

USDINR TECHNICAL CHART

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