USD Index Loses Bullish Momentum Below 91.00 As Fed Douses Inflation Fears

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Written By: Eno Eteng (MSTA)
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    Summary:
  • The Fed moves to douse expectations of hawkish action due to rising inflation, sending the USD Index (DXY) on course for a lower close to the week.

The USD Index’s (DXY) bullish move, which followed Wednesday’s consumer price index data, has lost momentum after Fed officials moved to douse expectations of any hawkish reactions by the apex bank.

Among Fed officials who reiterated the Fed’s dovish stand is the Cleveland Federal Reserve President Loretta Mester. Mester told Bloomberg TV on Friday that the Fed would communicate any changes to the policy stance in advance, reiterating that getting back to maximum employment was a key metric in such a consideration. Mester also said that the Fed “wants to see inflation go up and be on track for above 2%”, which seemed to suggest that the Fed would do nothing until this target was met.

The USD Index was sharply lower on this comment, losing 0.38%.

Technical Outlook For DXY

The price decline of the active daily candle has violated the 90.503 support. Bears need to seek confirmation of a breakdown of this price area with a 3% penetration close below the support for 90.228 to become a valid downside target. Below this area, 89.711 and 89.189 become additional targets to the south.

On the other hand, a failed breakdown of 90.503 or a bounce on 90.228 ultimately needs to aim for the 91.500 price resistance, where the channel’s lower boundary is expected to make contact. This move needs to take out sequential resistance barriers at 90.503, 90.965, and 91.261. Additional price recovery may then approach the psychological resistance at 92.00.

USD Index (DXY) Daily Chart

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Written By: Eno Eteng (MSTA)

Eno is a certified financial technician and member of the UK Society of Technical Analysts. He loves to trade and write about stocks, Forex, and CFDs. Since 2009, he has consulted several financial companies as a trader and strategy developer. His work can be seen on several forex blogs and trading educational websites.

Published by
Written By: Eno Eteng (MSTA)