US Dollar Index

The US Dollar Index plummeted on Tuesday, December 13, breaking below a major support following a softer-than-expected inflation report for November. This led to investors scaling back expectations for future Federal Reserve rate increases.

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Since the initial drop after announcement was released, the price of the Dollar Index has recovered almost 80%. Although this could simply be the pullback phase of a longer-term downtrend.

A downtrend is an overall decrease in price, created by lower lows and lower highs which can clearly be seen on the daily time frame, marked out in the chart below.

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This week’s CPI reading, combined with the technical analysis of the dollar index, suggests that the USD Index may continue to decline, with the next major support sitting around $102.25. The dollar index is currently retracing and testing a resistance zone between $104.40 and $104.90.