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US Dollar Backs Down After CPI, Holds Higher-Low Support


US Dollar Talking Points:

  • The US Dollar is pulling back after another failed test at resistance this morning, which followed a strong CPI reading.
  • The US Dollar remains in a bullish near-term spot but with Fibonacci resistance holding the highs for two weeks now, greater motivation might be needed to bring more bulls into the mix. There’s a couple of high-impact USD releases on Friday that could spark that motivation.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

It seems that the US Dollar has finally found some resistance that can put a pause in the bullish breakout. The Fibonacci level at 94.47 came into play on the final day of Q3, and despite a few additional tests since, most recently this morning, that level has been able to hold the highs in the USD for two weeks at this point.

To learn more about Fibonacci, check out DailyFX Education

US Dollar Daily Price Chart

US Dollar Daily Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

That horizontal resistance has held but on the other side of the matter, it’s also been bringing a diminishing marginal impact, leading to a series of higher-lows.

A hold above the 93.94 swing low can keep this door open, looking for bullish breakout potential in the USD. But a bit deeper is another area with some longer-term interest that I had looked at a few weeks ago, just ahead of the breakout.

On the below chart, there is a bullish trendline that’s currently holding the lows. If this does hold, the door can remain open for an ascending triangle formation, which could give perhaps even more attraction to near-term bullish breakout potential.

To learn more about the ascending triangle formation, check out DailyFX Education

US Dollar Four-Hour Price Chart

US Dollar Four Hour Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

US Dollar Longer-Term

Taking a step back, there’s a zone of support potential taken from prior resistance, and this resistance was what had held the high in the USD through the most of the first nine months of 2021 trade. This zone rests from the Q1 swing high up to the August swing high, spanning from 93.44 up to 93.73.

This zone did catch a bit of short-term support last week before bulls returned to bid prices back to resistance. But if a larger USD pullback develops, this would be an ideal spot to watch for buyer support to re-enter the equation. This is the green zone on the above charts and can remain of interest until the USD trend puts in further development.

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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