US Dollar Gains on Stimulus and Inflation Could Create a Price Low

The US Dollar index has recovered from recent losses after the potential for a further stimulus plan before the election faded. The USD rally from the 1 September low was created by the revival of stalled talks over a second U.S. stimulus package and the last week saw President agree to a $1.8 trillion package, which was higher than the Republican’s $1.5 trillion plan.

Democrats wanted $2.2 trillion and are digging their heels in over the additional $400 billion. Stephen Hughes, an economist and advisor to President Trump, said that a large package wasn’t needed due to expectations for a “record” third quarter GDP.

Today sees the release of key data from the U.S. in the form of September inflation. Inflation has recovered early in the year from 0.1% lows to 1.3% and the market now expects 1.4%. If this number is higher then the markets will have to re-consider the pace of the current path towards the FED’s 2% inflation target.  

If the third quarter GDP does outperform then this will add to prices, whilst a second stimulus would also find its way into higher inflation, just as the first one did. Today’s inflation will give traders an indication of how close the FEDs target really is. 

US Dollar Technical Outlook

The US Dollar index is trading below the 50-day moving average and a stronger inflation print would be the catalyst to take back that level and create a nice candle pattern for a price low. A close today near 93.50 would be a strong indicator of further gains. Waiting for that daily close would be advised. A lower close today would continue the downtrend. The Investing Cube team is currently available to assist all levels of traders with the Forex Trading Course or through one-to-one coaching.    

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US Dollar Index Daily Chart

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