Dollar Index Touched Expected Resistance – What Next?

The greenback hit its highest level since mid-November. The stimulus was reinforced by the consumer index of January (CPI), which pushed the market to delay the start of the easing cycle of the Federal Reserve.

Following Jerome Powell, the president of the Federal Reserve said that a March cut is unlikely, because the bank still needs more evidence of slowing inflation. Higher-than-expected inflation benefited the US dollar on Tuesday as markets began to wait until June for prices to kick in.  

Reports from the US Bureau of Labor Statistics showed that the core inflation rate rose 0.4% in January, beating consensus and the previous reading of 0.3%. A core inflation remained stable at 3.9%, in line with previous figures, but exceeding the forecast of 3.7%.  

US Treasury yields showed an increase in data. At current rates, the 2-year is 4.60%, the 5-year is 4.26%, and the 10-year is 4.27%, benefiting the US dollar.

Technical Outlook – Dollar Index:

The dollar index was traded at 104.8509 compared to the Monday closing 104.132, up 0.70%. This was the biggest intra-day gain since February 2, 2024.

The outlook for February 5, 2024 was proved correct considering as after breaking the huge resistance at 104.25. Yesterday, coins tested both predicted resistance levels at 104.55-104.75.

The formation of a bullish continuation consolidator suggests a further rise the following day. Furthermore, RSI 14 and its 9-day SMA reinforce the bullish momentum. This suggests that investors are showing a high-risk appetite and are aggressively buying assets.

In a broader context, the dollar index is now trading above the 20-day simple moving average (SMA), indicating a bullish market structure.

Therefore, the above technical considerations ultimately reflect the prevailing buying speed of the currency. A sustained move above 105.15 to the upside would more likely be the next line of resistance at 105.35-105.55. Otherwise, any decline to 104.6025-104.5025 will attract buyers.

on the downside, the decisive support remains unchanged at 103.80, only its green back could pull towards 103.3525-103.1525.

Commodity Samachar
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Also Read: US Inflation in Focus: Will the US Data Conquer Today’s Market? , Copper Update: It fell to projected support, what next?

Recommended Read: Forex News Letter : Will US CPI Data Be Instrumental In Shaping Fed’s Decisions?

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