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May 18, 2021

USD- Hottest Market Moves

Frank Cabibi

5/18/2021

USD pairs continue to push lower amid inflation fears as we see price hitting multi-month lows all around the board. The consumer price index or CPI has seen the biggest increase since September 2008 (housing crisis crash) of 4.2% as of a few days ago. The cost of most goods has risen tremendously due to the rise of inflation that has caught up with the Fed who had printed trillions of dollars after the March crash of 2020.

DXY

DXY 4H Chart

The dollar index (DXY) shows steady declines since April of this year. On the 4H chart, a strong downtrend looks very obvious, and heavy tops show hard resistance that this index will surely struggle with on the technical level. However, it does appear that DXY has bottomed for the time being; this index likes to create new lows before bouncing up and hitting resistance that eventually pushes price back lower again. The long wick on the mots recent 4H candle shows that price might be ready to swing up and set up another short play. With inflation now at 4.20%, there is hardly much of any reason to be bullish on the dollar so further lows are expected.

USD/CHF

USD/CHF 4H Chart

UC looks pretty bearish too as price seems to have potentially bottomed out for the time being. If this is true, we could see another test at resistance on the falling trend line drawn on this chart. This pair is the biggest mover for the day at a -0.65% drop today even with bearish sentiment around the Swiss Franc and their negative interest rates. Below is an image of USDCHF paired with the DXY to show how the pair mimics DXY.

USD/CHF Compared to DXY's Behavior

You can see that this pair is heavily mirroring the DXY which is something important to note. This could mean that USD is what traders should pay attention to in gauging where USDCHF could move in the near future.

XAU/USD

XAU/USD Compared to DXY 4H Timeframe

In the same sense, let's look at how gold moves when compared to DXY. You can tell that the dollar index moves are less volatile, but very much opposite of how gold moves. When gold tanked at the start of this year, the dollar gained. And now DXY is falling while the gold pair rises up above huge resistance. Overall sentiment is bearish on the dollar, so buying this pair means long gold and short USD.

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