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Dollar Index hits one-month low, lower lows pattern established

  • Dollar index (DXY) drops to a one-month low on curve flattening.
  • Technical chart shows a bearish pattern.

DXY hit a one-month low of 93.21 in the overnight trade as Fed's inflation worries meant slower rate hikes.

The treasury yield curve turned flattest in a decade, which appears to have weighed over the US dollar.

Adam Button from AshrafLaidi.com writes, "the Fed is increasingly getting worried about low inflation. Today's release of the FOMC minutes showed some members want to hit the pause button after a December hike and wait for inflation to get closer to target. There is probably some truth in that as well."

Weak inflation is surely hurting the greenback. Further, the market may have lost faith in the efficacy of the tax reform. Button says, "the dollar is selling because of the tax plan... Maybe the market is saying that this plan isn't going to boost incomes, wages, investment or growth. Instead, it will add to the deficit and lead to spending cuts down the road. What it will do is boost corporate profits and that explains the rosy reaction in stocks."

Looking ahead, the American calendar is light. Trading volumes are likely to remain weak on account of the Thanks Giving holiday in the US.

Dollar Index Technical Outlook

Yesterday's close was below the Nov. 15 doji candle. The move has established lower highs and lower lows pattern on the daily chart and could yield a move down to 92.80 (Oct. 12 low). On the higher side, breach of resistance at 93.64 (50-day MA) would expose 94.16 (Nov. 21 high) and 94.41 (Nov. 2 low).

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