Dollar Index extends its falls below 90 ahead of the key inflation report

  • The US Dollar Index is extending its losses after turning around yesterday.
  • The US inflation report is set to determine the next significant move of the dollar.
  • The wider technical picture remains bearish.

The US dollar index is trading at around 89.70, falling below the round 90 level. The recovery of the index sent it to a high of 90.60 but well above the low of 88.60. 

The US dollar has been under pressure on Tuesday as stock markets stabilized. Equities are trading slightly higher on the day, but trading volumes and volatility have both calmed down. The share sell-off last week supported the greenback against most of its peers, triggering a recovery in the US Dollar Index. 

Markets are waiting for the closely-watched US inflation report on Wednesday. Core CPI is expected to remain unchanged at 1.8% y/y. See the full preview here. The US will also publish the retail sales report for January. 

US Dollar Index Technical Analysis

The US Dollar Index is trading well below the 200-day Simple Moving Average and also below the 50-day SMA which currently stands at 91.60. The RSI has resumed its falls after attempting to recover above 50 and is sliding once again, pointing to further losses. Momentum remains negative. 

At current levels, the index is close to 89.60 that capped the pair in late January. Below this support line, 88.60 is a critical support line. Below 88.60, 85 is the next significant level to watch. 

Looking up, the top of the recent range is 90.60. Further above, 91 serves as resistance after holding the index down early int he year. The 91.60 level is notable as well.

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