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Can’t decide which dollar pair to trade during the U.S. CPI release?

Check out this potential breakout on the U.S. dollar index instead!

U.S. Dollar Index (DXY): 1-hour

U.S. Dollar Index (DXY) 1-hour Chart

U.S. Dollar Index (DXY) 1-hour Chart

Brace yourselves for a breakout, fellas!

The dollar index has been in consolidation mode, forming higher lows and lower highs inside a symmetrical triangle on its hourly time frame. It just bounced off the triangle bottom and seems to be eyeing the top again.

Will dollar bears defend the ceiling this time?

It could all boil down to the upcoming U.S. CPI report, as traders would likely use the results as basis for their Fed policy expectations.

Number crunchers are counting on a much slower increase in price pressures, with the headline reading slated to show a meager 0.2% uptick versus the earlier 1.3% jump. Meanwhile, the core inflation likely dipped from 0.7% to 0.5%.

Weaker than expected figures could dampen hopes of another 0.75% rate hike, possibly leading to a breakdown for the U.S. dollar index. If that happens, DXY could tumble by the same height as the chart pattern.

On the other hand, a huge upside surprise could spur a break higher, especially since the latest NFP report turned out waaay better than expected.

Technical indicators are giving mixed signals for now. The 100 SMA is above the 200 SMA, favoring a bullish breakout, while Stochastic is reflecting exhaustion among buyers.

In any case, stay on the lookout for additional volatility during the release, and be careful of fake outs!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.