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Ahead of today’s CPI release for the US and Fed minutes, I just wanted to take a quick look at the Dollar Index and suggest some key levels we need to watch. Perhaps these two items of news will help to give the index some much needed direction.
Since the beginning of the year the index has been oscillating around the key 90 level. However it's never quite been able either to pull away in any meaningful way or take out this year’s low at 88.15. And this relatively tight range has, of course, been reflected in the eurodollar which too has been trading in congestion since the beginning of the year.
But to return to the DXY, the levels to watch in the run up to the Fed minutes release are, to the downside 89.08 where a break here would take the index down to 88.99 and on to test 88.50. However, if the CPI comes in significantly higher, coupled with a very hawkish Fed, 89.08 would provide the springboard for the index to test 90 once again and offer the opportunity to take out the 2018 high at 90.89. What happens in the DXY will be most reflected in the eurodollar pair as well.
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