CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

CPI a NonEvent for DXY with Trade Talks Ongoing

October 10, 2019 10:32 AM

CPI a Non-Event for DXY with Trade Talks Ongoing

US headline CPI for September was 0.0% vs 0.1% expected and 0.1% last.  However, the more important Core CPI (YoY) for September was 2.4%, as expected, and 2.4% last.  Core CPI is the measure of CPI ex-food and ex-energy.  This is one of the Fed’s key measures of inflation, which remains above the Fed’s 2.0% inflation target.  As the Minutes from the September have shown,  the Fed was slightly more hawkish in their latest assessment.  However, since that meeting, manufacturing and PPI data have come out worse than expected.  The Fed needs to see if these leading indicators feed through to the rest of the economy, which is why they remain data dependent.

Upon release of the data, the US Dollar Index (DXY) was trading near the lows of the day at  98.75 as speculation swirls regarding the US-China trade discussions.  DXY has been in an upward channel since May 2018.  However, since September 13th, the US Dollar Index has been forming a rising wedge within that longer-term channel.  Today price broke lower out that that wedge.  The target for the breakdown of a rising wedge is a 100% retracement.  However, price has held strong horizontal support at the 50% retracement of the wedge, which is 98.76. 

Source: Tradingview, City Index

On a 240-minute chart DXY is putting in a flag formation.  After moving lower from the highs of 99.67, price moved to the horizontal support at 98.76, and bounced.  As DXY broke lower today out of the rising wedge, it also broke out of the flag and is once again testing that horizontal support area.  The target for the breakout of a flag is the length of the flagpole added to the high before the breakout of the flag formation, which in this case is 98.15.

Source: Tradingview, City Index

If DXY can close today below the 98.76 horizontal level, probabilities increase that price will aim for the flag target level at 98.15 as well as the target level of the ascending wedge at 97.84.  If we reach those targets, watch for a move to test the upward sloping trendline near 97.00.  Horizontal resistance above at yesterdays spike lows at 98.90.  Above there, DXY can shoot all the way to previous highs at 99.67 if patterns fail.

Of course, as we have been mentioning all week, keep an eye out for headlines and tweets regarding the China-US trade talks.   


StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024