Wednesday, October 14, 2015

Dollar Weakens With Soft Retail Sales and PPI

Candlestick Technical Analysis: U.S. Dollar

DXY:  The dollar index is lower by .5% this morning following weaker than expected retail sales and producers prices reports.  It was expected that sustained wealth gains as well as increased income on the back of steady employment growth would have resulted in stronger retail sales.   Instead of being higher by +0.3%, the September retail sales figure was -0.1% for the ‘control group’.  The PPI report was similarly dollar-unfriendly with a September reading in X-Food and Energy posting a -0.3% rather than an expected +0.1%. 

The dollar index has softened by 2.6% since the high reached on September 25th.  That session formed a bearish ‘doji shooting star’.  Indicating both indecision and a rejection of a new one month high, that formation was confirmed with subsequent price action.  The bullish implication of the September 30th settle at 96.35 was discounted the following session with the ‘bearish harami’ formation. 

There has only been 5 new session lows without a three session pause of late, indicating that oversold conditions are not a concern at this stage.  The September 18th low of 94.063 is not expected to offer much support.  More important for near-term price action is the prospects for a settle below 94.55 (current 94.37).  A settle below that September 17th low would suggest further losses and a possible test of the August 24th low settle of 93.332. 

Last Friday, the dollar index fell below a bullish trend line support dating from late-August and intersecting trade at a low from mid-September.  This is not a particularly significant trend line, but its failure does help to support my conviction that a trade to 93 is likely before 97.         

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