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USD Index Futures Technical Analysis – More Needed from Fed to Handle Inflation

Several Federal officials warned market players (this week) about being over-optimistic following this week’s somewhat softened inflation figures.

The USD edged higher against multiple currencies today. That follows traders’ concessions that the Federal Reserve will have more to do to handle inflation.

That indicates that this week’s adjustment in 75 basis points hike bet to 50bp in September could have been a reflex response to softer-than-anticipated falls in production and consumer inflation in July.

What market players could have ignored is inflation stays elevated, and the Federal should maintain aggressiveness in the short-term to cool inflation to the delegated 2% mark.

While publishing this blog, the USD index futures traded at 105.216, gaining 0.21% or 0.221. On Thursday, the UUP (Invesco DB USD Index Bullish Fund ETF) hovered at $28.12, up 0.05%.

An understanding that the Federal should adopt a more aggressive stance in rate hikes emerged from several Fed officials who warned market players against being over-optimistic. Remember, investors gained hope following this week’s briefly softened inflation figures.

For instance, Mary Daly stated that a 50bp rate hike comes September remained logical considering the latest economic stats on inflation.

However, she believes a massive rate hike remains a possibility whenever data warrants. Meanwhile, these narratives keep the USD underpinned. The dollar will likely move higher whenever bets change to a 75bp rate increase in September.

Daily Chart Technical Analysis

The primary trend remains down, but momentum could be readying to switch to the upside. A move through 104.515 will suggest downside resumption, whereas an upside past 106.810 will shift the bias to the upside.

Meanwhile, the primary range stands at 101.170 – 109.140, and the retracement area at 105.155 – 104.315 halted the selling near 104.515 during Wednesday’s sessions.

The small range is 106.810 – $104.515.its 50% zone at 105.665 remains the initial upward target. Also, the near-term range stands at 109.140 – 104.515, and its 50% represents a possible resistance near 106.830.

Bullish Case

A sustained move beyond 105.155 will confirm buyers’ presence. Enough upside here will trigger an uptick into the 105.665-minor pivot. Surpassing this mark could catalyze accelerated upside, potentially targeting the resistance cluster of 106.810 – 106.830.

Bearish Case

Sustained moves beneath 105.155 will confirm selling activities. That might welcome 104.515 before hitting the primary FIB mark at 104.215.

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