The US Dollar index is now at a critical support level ahead of tomorrow’s key economic data. The next two days will probably decide whether the greenback can continue the recent rally, or whether the downtrend will return. The dollar weakness in July was a key event in markets with a big rally in commodities, such as gold and silver, so it is an important crossroads.
Tomorrow will see retail sales released for the US economy. This is a widely-watched number because of the high sensitivity of the economy to consumer spending. Analysts are looking for a 1% return for August after 1.2% in July and the number will determine the strength of the consumer rebound after the second quarter lockdowns.
Later in the day, we will also get a Federal Reserve interest rate decision. Economic data from the US has been strong enough to avoid any action on rates, but the market will be focused on the economic projections. The dollar recently sold off heavily due to high budget spending and stimulus spending but the US economy saw inflation of 1.3% and this isn’t too far from the FED’s 2% target. In the EU we saw a deflationary print, so the market may be getting ahead of itself with the recent strength in the Euro.
Tomorrow’s data will be a key driver of the dollar in the days ahead and if selling pressure returns, then we could see another push higher in precious metals and cryptocurrencies.
US Dollar Index Technical Outlook
The US Dollar is testing the support level from the recent breakout. This is a critical moment for the USD after the weakness in July led to a rally in commodities such as gold, oil, and cryptos. The coming days will decide if the dollar can continue the rally, or whether it continues the larger downtrend. Tomorrow’s data will drive the USD. A move above 93.00 and 93.50 sets the stage for gains, while any further weakness will likely see the selling return. The Investing Cube team is currently available for Trading Coaching. More details are available here.
US Dollar Index Daily Chart