- The dollar index is under pressure this week, and the reason for this is the inflation news that awaits us later in the American session.
Analysis of the dollar index chart
The dollar index is under pressure this week, and the reason for this is the inflation news that awaits us later in the American session. The index fell below 104.00 yesterday, reaching a new weekly low of 103.88. We get support below and recover at 104.20 level. Here, we encounter the 50 moving average, which does not allow us to move above it; Instead, we stay below it.
During the Asian session this morning, there is a new increase in bearish pressure and we drop to the 104.00 level. The current bearish consolidation tells us that we are likely to see further declines and the dollar index is at a lower level. Possible lower targets are 103.95 and 103.90 levels.
Do we continue to fall to a new low or start a dollar recovery?
We need to get back above 104.20 and the EMA50 for a bullish option. After a new low is formed in that area, we have the opportunity to start positive consolidation and start the recovery. In the first step above, at 104.25, we encounter the EMA200 moving average. Its behavior against the dollar index could show a long-term trend. If we are allowed to go higher the possible higher targets are 104.30 and 104.35.
US inflation data will be published in a few hours during the American session. Expectations indicate that the data may be weaker than expected, which may have a negative impact on the dollar index. After that, the Bank of Canada will announce the future interest rate, which is expected to remain at the same previous level of 5.00%. At the end of the US session, we have the FOMC meeting and their view on future monetary policy and the US economy.
