DXY remains near the 3M high, opening the week flat after last week’s slight correction, despite cooled dovish expectations among traders for a rate cut at the end of Q124 from the Fed side. US inflation data will be released later in the week (Tuesday, 3:30pm), with traders underweight the dollar, leaving room for a sharp jump in higher-than-expected inflation.
-January’s enviable jobs numbers signal that the economy remains resilient, with the latest GDP reading beating expectations. A strong earnings season to confirm a strong U.S. economy. This maintains the Fed’s bullish tone, reducing the odds of a rate cut in March to 18.3%.
-Market sentiment for US CPI shows a YoY decline to 2.9% from 3.4%, as well as Core CPI cooling YoY to 3.8% from 3.9%. This would mark further Fed expectations, supporting a deeper correction in the DXY direction.
DXY opens the new week with a slight rise, staying around 50.0FIBO, continuing its consolidation in the trading range with an upper limit of 104.60 and a lower limit of 103.92, trading at the lower limit of the ascending channel after the dead cross (bearish lagging indicator). Currently, the dollar index is making a mini triangle formation (bearish indication).
-Dem hold in overbought territory after bounce from bullseye with neutral levels.
-Seq with a print of down 2ka – a signal for the start of a downward pulse, as a confirmation will come after printing a 3ka.
A breakout of the upper boundary of the triangle formation will strengthen the up momentum, pushing the dollar towards a test of the 61.8FIBO and 76.4FIBO levels. While a break and close below 103.98 will support a more serious correction, testing the 200MA and 65MA (38.2FIBO) levels.
Dealer Aleks Angelov