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USD Up On Data — The Technicals

ByChristopher Lemieux
Published 10/22/2014, 09:55 AM
Updated 07/09/2023, 06:31 AM

The US dollar breaks the 4H descending triangle on better than expected consumer price data this morning, printing a .1 percent increase versus August's .2 percent contraction. Downward pressure on prices still remain apparent, and the dollar will lag because of it.

This disinflation scenario will ultimately lead the Federal Reserve into not increasing rates in 2015. The remaining taper will proceed but will likely not mean anything as Fed hawks Charles Plosser and Richard Fisher will no longer be voting member in 2015. Keep in mind, QE 1 and 2 were fully tapered prior to Operation Twist and QE 3. It only took less than a 10 percent pullback before Fed members began to flap at the gums about accomodating policies indefinately.

The dollar also got a boost on disappointing Canadian data, which saw retail sales contract .3 percent. The Bank of England's Monetary Policy Committee (MPC) voted once again not to increase interest rates. Both the loonie and sterling trade lower.

The price action will become bullish with a close above the descending trend line with 85.90 being the nearest likely resistance level before retesting 86. The dollar could a boost higher, as COT data shows the largest flood of speculators into the dollar futures at record levels. If price action trades back within the triangle, look for a retest of the broken resistance, now support, lines (magenta).

Neutral on the dollar short-term, as I expect pops of action to occur. However, I remain bearish on the dollar 3-12 months out.
The U.S. Dollar Index

Check out Chris at TradingView.com

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