Indian Rupee
Indian rupee is at 21-month low vs dollarReuters

The Indian rupee has fallen near two-year lows as the market braces for a very important Eurozone meeting and the Federal Reserve policy review.

USD/INR jumped to 64.3025, its highest since 13 May as per intra-day levels, from the previous close of 64.10. The pair ended the day's deals at 64.24, its highest close since September 2013.

The Indian currency has fallen more than 0.5% against the dollar over the past four sessions, and over the past four months, losing more than 4%.

The rupee is testing a crucial technical support now. The USD/INR pair therefore has more risks on the higher side. Charts show that as long as the 63.15-62.50 support zone holds, the pair is all likely to break above the 65 mark and then 66 ahead of new highs beyond 68.0.

On Wednesday, the FOMC will announce monetary policy, and the market is expecting more clarity about the timing of the first Fed rate hike in about a decade.

"An update to economic projections with a new dot chart should provide not only greater guidance as to whether we'll see just one or two rate hikes this year and determine whether September is the favourite for the first one, but also give a better idea of when and where the end rate will be, currently expected to be above 3.00% by the end of 2017," said Angus Campbell, senior analyst at FXPro.

Analysts say that consolidation in dollar shows the market is preparing for a dovish statement this time.

The Eurogroup meeting on Thursday could prove even more important according to many experts the deadline for Greece's IMF payments closing in and the country having to strike a deal as soon as possible to avert a default.

Data from India has also been weak as per the trade data released on 16 June.

Another big factor weighing on the Indian economy is the forecast of a weak monsoon this year. Rainfall of below 90% of long period average means that it is a drought year, so with this year's rainfall projected at 88% of LPA, fears of drought in Asia's third largest economy cannot be ignored.

With 18% of the $1.8trn Indian economy fed by farm output, a drought year will affect several sectors that significantly depend on rural demand.

The banking sector has challenges as farm loan NPAs are set to rise and industries like two-wheelers and tractors are also gearing for a tough year ahead. Fertilisers and FMCG are the other sectors likely to be affected due to less rainfall.

EUR/USD has fallen to 1.1239 from the previous close of 1.1283 but the pair has been holding above the 14-day moving average since the first week of this month.

Also, it has been keeping above the 50-day SMA since end April, showing investors' reluctance to sell off the common currency despite Greek-related challenges. The euro is also supported by a view that the FOMC is likely to weaken the greenback, according to analysts.