Dollar Index outlook: Bulls pause after US data and look for fresh direction signal

Dollar Index

The dollar holds in a sideways mode vs the basket of major currencies for the second straight day, as US September CPI data cooled expectations for another Fed jumbo rate cut, though the sentiment is still bullish and keeps the greenback afloat.

Markets digested the latest key economic data which showed slightly hotter than expected inflation in September and warned that Fed’s battle with inflation is still far from the end, but immediate fears were tempered by weekly jobless claims well above consensus.

The dollar index is on track for another weekly gain, although much smaller than the previous week’s 2.1% advance, but initial signal of a stall of recent bull-leg and potential reversal, is developing on daily chart.

The notion is supported by overbought conditions, fading bullish momentum and formation of a bull-trap pattern, although more work at the downside will be still required to generate initial bearish signal.

Rising 5DMA / Thursday’s low mark immediate supports at 102.45, guarding more significant 102.00 zone (broken Fibo 38.2% of 105.78/99.84 / round-figure / rising 10DMA), loss of which would open way for deeper correction of 99.84/102.95 upleg and expose next pivotal supports at 101.76/68 (Fibo 38.2% / daily cloud base / rising daily Tenkan-sen) and 101.40 breakpoint (50% retracement / daily Kijun-sen).

Res: 102.81; 103.01; 103.34; 103.54.
Sup: 102.45; 102.11; 101.90; 101.40.