Technical Bias: Bullish
Key Takeaways
US dollar index reversed from an important support zone yesterday.
Intraday gain in the dollar index seems to have found quite decent strength.
EURUSD was one of the worst performers as it traded towards 1.2700.
Looking ahead, attention turns towards the US consumer price index which is expected to come in at 1.6% versus 1.7% previous. If it registers an increase, the US dollar might gain traction moving ahead.
Technical Analysis
Markets were in a bit of a better mood this morning as the dollar index mostly consolidated yesterday’s gain. It fell recently towards 84.75 where it found an important support in the form of a bullish trend line on the 4 hour timeframe. The dollar index bounced sharply from the mentioned support area, and closed back above the 200 simple moving average (SMA) – 4H. Yesterday during the NY session, it was seen struggling around the 50 SMA (4H) which acted as a hurdle for the US dollar buyers. There is a critical resistance towards the upside around 100 SMA (4H) which also coincides with the 50% Fibonacci retracement level of the last drop from the 86.72 high to 84.52 low. So, there is a high probability that if the US dollar index manages to climb towards the stated confluence area, then it might struggle to gain strength above it.
On the downside, the 200 SMA (4H) might continue to act as a support for the US dollar index. Any further downside might call for a retest of the all-important bullish trend line. Sellers need a close below the same for sustained downside moving ahead.
US Consumer Price Index
There is an important economic release lined up during the NY session i.e. the US Consumer Price Index by the US Bureau of Labor Statistics. The forecast is of 1.6% increase in September 2014, compared to the last year. It would be interesting to see how the US dollar behaves post release, especially if outcome misses the expectation.
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