Last week’s consumer inflation figures continue to be the main talking point about US fundamentals. According to Jane Foley, Head of FX Strategy at Rabobank, the USD (and by extension the USD Dollar index) could benefit from the ongoing inflation pressures.
Despite assurances from the Fed that inflationary pressures are transient, there are sufficient doubts over whether the pressures on consumer prices are really fleeting, and this will keep the markets anxious, according to the research report from Rabobank. The bank expects some choppy trading around the USD, with pockets of strength in the months to come.
This Monday, the market remains relatively quiet on the back of an absence of activity from the fundamental side of things. However, activity is expected to pick up later in the week when the FOMC minutes are released on Wednesday. The USD Index (DXY) is up by 0.07%.
Technical Outlook for DXY
The USD Index has formed a doji on the 90.228 support level. This marks indecision on the part of traders and potential exhaustion of selling pressure on the USD. A bullish day candle confirms the morning star pattern, with a targeted close above the 90.965 resistance eyed by bulls.
Another bullish outside day candle confirms the continuation of the reversal, targeting 91.26 and 91.50 as the next upside barriers. A break of the latter clears the pathway towards the 92.00 psychological resistance, with 92.50 lining up as a resistance target for the future.
On the other hand, a breakdown of the 90.228 support negates the previous outlook and opens the door for bears to dash 89.71. 89.18 lines up as an additional target to the south.