Think you’re ready for tomorrow’s U.S. CPI report?
Not before you see where the U.S. dollar index is trading ahead of the release!
See, the U.S. dollar has been in an observable uptrend since the start of the year but it wasn’t until early August when price patterns started showing an ascending channel.
On a technical basis, the dollar has room for a bit of retracement.
U.S. Dollar Index (DXY): 4-Hour
U.S. Dollar Index (DXY) 4-Hour Forex Chart
DXY is trading between 113.00 and 114.00, which is pretty close to the top of the ascending channel pattern.
Not only that, but there’s also a bit of a bearish divergence on the 4-hour chart!But WILL the dollar lose pips across the board this week?
One catalyst would be profit-taking ahead of the U.S. CPI release.
Word around is that today’s annualized producer price index and tomorrow’s consumer price numbers will reflect slight slowdowns from August’s growth rates.
Those who believe that slightly slower price growth figures would convince the Fed to slow down its interest rate hikes may start selling USD in favor of “riskier” bets like GBP and comdolls.
Of course, trends will remain traders’ friends until they bend and the dollar’s uptrend is no exception.
Unless today’s FOMC meeting minutes release opens the door to easing the pedal from the metal, then Fed members will need at least a couple months’ worth of lower consumer price data before they vote for lower (or no) interest rate hikes.
Look out for buying pressure near 112.30, which lines up with the mid-channel support and is not far from the 4-hour chart’s 100 SMA.
If there’s enough selling, then you can also look at the 111.00 – 111.20 support zone. As you can see, it’s closer to the bottom of the channel and the 200 SMA on the chart.
Good luck with your dollar trades, my dudes!
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