• USDInd waits for fundamental spark
  • Watch out for US inflation report
  • Descending channel on H4 charts
  • Key levels of interest at 104.31 & 104.00
  • Possible breakout on horizon

After struggling for direction over the last few days, the USDInd could be injected with fresh volatility due to the incoming US inflation report.

The Consumer Price Index (CPI) measures the average change in the prices of a basket of goods and services over a period.

Given how today’s CPI data has the potential to influence expectations around when the Federal Reserve will start cutting interest rates in 2024, it will most likely move the USDInd.

Markets are expecting US inflation to slow to 2.9% from 3.4% on an annual basis while the core which strips out volatile food and energy prices is expected to cool 3.7% compared to 3.9%.

Ultimately, further signs of cooling inflation may fuel Fed cut bets, weakening the dollar as a result.

As of writing, traders are pricing in a 70% probability of a 25 basis point US rate rate cut in May.

These odds may be influenced by the incoming inflation report along with other key US data this week.

Note: USDInd tracks how the US dollar performs against a basket of its G10 peers including EUR, GBP, JPY, and others.

Technically Speaking

USDInd, on the daily timeframe is in an upward sloping channel which began on December 28 2023.

In addition, the last 6 days of trading have seen it move in a sideways range of about 718points.

At the time of writing, there is potentially, about 260 point move to test the sideways ranges resistance at 104.512.

On the 4-hour time frame however, the index is in a descending triangle and testing this patterns resistance at the time of writing.

According to Thomas Bulkowski, in his book “The Encyclopedia of Chart Patterns”

A descending triangle in a bullish market:

  • Is an intermediate-term bullish continuation pattern.
  • Rises 38% on average.
  • Meets its price target 64% of the time.

An upward breakout of the descending triangle (a more likely scenario with a hotter than expected CPI data), may lead to a test of the following levels.

  • 104.512: - The channel resistance on the daily time frame

  • 104.679: - The 161.8 golden Fibonacci ratio

On the other hand, a downward breakout of the descending triangle (a more likely scenario with a cooler than expected CPI data), may lead to the test of the following levels.

  • 103.917: - The sideways channels support on D1

  • 103.710: - The 21-day Exponential Moving Average (EMA)

  • 103.524: - The 50-day Exponential Moving Average