Forex Update: USD Index Biding its Time?

February 15, 2023
by Joseph Jeffriess, Market Analyst

Today we are taking a look at the USD index.

Wednesday morning’s CPI data delivered a surprise to the upside, but was it really a surprise? There was talk that we could see an increase, and while the M/M came in as expected at 0.5%, this was an increase on the last data. The other increase was on the Y/Y, and that actually beat expectations coming in at 6.4%

The USD index reacted mixed to the news, plunging on the release but only to pull back losses and close out the session higher. Today buyers have picked up on yesterday’s momentum with a new push higher, and that’s technically where we sit with current price action.

Taking a look at the chart posted below, we can see that buyers are trying to get a new move going, but for now, they remain trapped in a consolidation after this month’s breakout. Yes, price continues to trade outside a main downtrend line, and it still has some work to do to get the new uptrend back on track.

Range resistance stands at 103.60, and range support stands at around 103. These are our range levels, and we want to see a new breakout to give us an idea of which way price may run. Since we have an upswing proceeding the move, we will continue to lean towards higher prices on the USD index, but this really depends on if buyers can form a new push higher, sooner rather than later.

Fed policy remains an issue as, for now, we aren’t clear on exactly what they are doing. Inflation is seen as reducing, but we will see more rate rises as it sits well above 2%.

We feel that we might need something more solid from the Fed to give buyers the drive they need to take things higher. In the short term, while buyers can hold the range and hold 103 we still feel that price may make a new push at breaking to the upside. This Friday’s PPI could be a factor, and it is due for release at 12:30 am Saturday and expected to come in at 0.4%. US retail sales are also due, but they may have to come in super hot to influence the economy.

USD Index D1 Chart

Good trading.

All times are AEST.