US Dollar Index: Dollar Eyes US Inflation Data

Technical analysis of Forex market

The dollar index edges lower on Wednesday after rebound on better than expected US NFP showed signs of stall.

Repeated failure to clear initial Fibo resistance at 95.66 (23.6% of 97.42/95.12 bear-leg) weakened near-term structure, as daily MA’s (10/20/55) remain in negative setup and 14-d momentum stays in the negative territory.

The action, however, remains underpinned by 100DMA (95.24) and the base of thick daily cloud (95.08), but renewed attack at these supports cannot be ruled out.

Violation of these levels would signal an end of limited corrective phase of larger downtrend from 97.42 (2022 high).

Bullish scenario requires firm break of 95.66 Fibo barrier to generate initial bullish signal, which would look for confirmation on extension through 96.00/10 pivots (daily Kijun-sen / cloud top).

The action is likely to stay in a quiet mode ahead of key release of this week – US inflation, which is expected to generate stronger direction signals.

The price pressure is expected to rise further in January as forecasts see annualized inflation rising to 7.3% from 7.0% previous month that would increase pressure on the US central bank which has already penciled a rate hike in March and signaled three-to four further hikes this year.

The greenback may accelerate on inflation data beat as this would signal that Fed’s view of transitory process is no more valid and prompt a stronger action from the central bank.

Res: 95.73; 96.00; 96.10; 96.27
Sup: 95.24; 95.08; 94.87; 94.59