US Dollar Price Forecast: DXY Eyes 99 Ahead of CPI – Can GBP/USD and EUR/USD Hold?

Market Overview

Early European trading on Tuesday saw the broad US dollar keep on trucking with its bullish trend , and remain firmly in demand near the 99.00 level despite everything. The US Dollar Index (DXY), which is an index of the US dollar against a basket of six major world currencies, is currently trading at 98.75, up just 0.03%.

However, the reason why it’s going up is no great mystery and is likely due to rising tensions in the Middle East. The impending release of the US Consumer Price Index (CPI) data is also casting a big shadow over the market right now.

Middle East Tensions Drive Up Safe-Haven Demand

We said as much earlier , the US dollar got a bit more clout as uncertainty over the Middle East just got a whole lot worse . Iran’s Islamic Revolutionary Guard Corps declared that Tehran will call the shots on when this particular conflict ends, not the USA, and warned that if the US & Israel keep up their attacks, Iran could just shut off the oil taps.

Meanwhile, US President Donald Trump told everyone that if Iran tried to disrupt oil flows through the Strait of Hormuz , the US would be coming out swinging. And that’s basically just added to the already heightened risk of a protracted conflict – and as such has kicked up the demand for the US dollar as a safe place to be.

US Inflation Fears Bolster the Dollar

The ongoing uncertainty is also sending shivers down the spine of anyone worried about higher inflation – which is why the Fed is probably going to have to keep interest rates nice and high. According to the CME FedWatch tool , the markets think theres a 95% chance that the Fed will keep rates right where they are at the upcoming meeting in March.

But the recent US February employment report made life very difficult indeed for the Fed. Payrolls took a nosedive of 92,000 and the unemployment rate actually went up to 4.4% from 4.3% just the month before. The soft jobs numbers on top of those already simmering inflation worries have basically got the Fed between a rock & a hard place.

Market Eyes on Wednesday’s US CPI Data

Now everyone is waiting with bated breath for the US CPI release on Wednesday . Analysts reckon the headline CPI will have gone up 2.4% year on year , while core CPI will be 2.5% . So if the inflation print comes in a bit stronger than expected , that will just help the buck even more.

But on the other hand – if things start to get any worse in the Middle East we can probably expect to see the DXY keep on going up a bit longer yet

U.S. Dollar Index Slips Below 98.62 – Is the Uptrend Losing Steam?

The US Dollar Index is currently trading right around 98.59 on the 4 hour chart, after slipping just below the 0.50 Fibonacci level of 98.62. That’s after it failed to hold onto the gains it made up to 99.68. Still inside that rising channel but the momentum has started to soften as those candles start to close beneath the short term support.

Short term support is in at 98.37 (0.618 Fib), then comes 97.55. And then there is the resistance at 99.18 and 99.68. The 50 day EMA is just now being tested at 98.55 and the deeper level of support is the 200 day EMA at 98.10.

RSI is slowly making its way down towards 45, and that tells us the bullish momentum is starting to fade. If it breaks below 98.37 we could be looking at a whole lot more downside action.

GBP/USD Breaks Channel Resistance – Can $1.3480 Sustain the Recovery?

GBP/USD is trading roughly at $1.3461 on the 4 hour chart after taking off sharply from the bottom at $1.3285 and then pushing right on through that descending channel resistance. The recent bunch of bullish candles we’re seeing have pretty sizeable bodies and higher lows – that tells us the near term set up has shifted in favour of the bulls.

Price has managed to get back above the 50 day EMA at $1.3413, but the 200 day EMA around $1.3550 is still hanging right over it as resistance. The immediate bit of resistance we need to watch is $1.3489, then comes $1.3574.

The RSI has been pushed up towards 60 and that tells us momentum is getting better but it’s not overbought just yet. As long as its still sitting above $1.3410 we can still call this a recovery – but if it does break below we might have to start worrying about support down at $1.3346.

EUR/USD Reclaims $1.1650 – Channel Resistance Now in Focus

EUR/USD is just now trading near $1.1652 on the 4 hour chart, after a pretty sharp rebound from the base at $1.1530, and it’s now pushing right on back up through that $1.1600 (0.236 Fib) level. Still inside a descending channel but those recent bullish candles look to have much bigger bodies and they’ve got higher lows, that’s a clear indication that things are looking up short term.

Now we’re coming up against the $1.1679 (0.5 Fib) zone, and that’s also where channel resistance and the 50 day EMA are converging right on top of each other. The 200 day EMA is down at $1.1765 and that’s the upper resistance for now. RSI has climbed up towards 60 and that’s telling us momentum is starting to pick up again. Breaking above $1.1680 might well take it up to $1.1714 but if it fails we could see it backing off towards $1.1600.