US Dollar Index outlook: Dollar regained traction after mixed US labor data

US Dollar Index

The dollar index rose on Monday after almost equal bets for 25 or 50 basis points Fed rate cut diverged in favor of less aggressive option, cooled by mixed US jobs data which point to orderly slowdown in US labor market.

Although the dollar benefited from more dovish signals, markets look for further information to complete the picture of possible Fed decisions in the policy meeting, due later this month.

Release of US August inflation report on Wednesday is expected to provide the last part of mosaic, which US policymakers look for.

However, rising concerns about the condition of the US economy, in light of the recent information that the economy is at the edge of recession, keep traders as well as the central bank cautious.

Consumer prices are expected to rise at unchanged pace of 0.2% month on month in August, while annualized inflation is expected to ease to 2.6% from 2.9% in July.

Technical picture improved on daily chart, as north-heading 14- momentum broke into positive territory and the price rose above converging 10/20DMA’s, with the action being underpinned by long-tailed Friday’s candlestick which points to strong bids.

However, signals still look for verification, with close above 20DMA (101.44) seen as minimum requirement with sustained break above 101.84 (Sep 3 lower top) needed to complete bullish failure swing pattern and confirm signal.

Res: 101.65; 101.84; 102.03; 102.64.
Sup: 101.23; 101.08; 100.49; 100.38.