The latest U.S. inflation numbers are out and more Fed officials have weighed in!
In case you missed it, Uncle Sam just showed that consumer prices have eased from 6.5% to an annualized growth of 6.4% in January.
Thing is, markets were expecting a dip to 6.2%. Monthly prices also rose by another 0.5% in January and hinted that a high inflation would not be "transitory" as the Fed had expected.
Higher and stickier inflation numbers only supported the Fed members' recent remarks about raising interest rates further or keeping their rates high for longer.
U.S. Dollar Index (DXY): 4-Hour
The U.S. dollar index, which recently broke above a months-long descending trend line resistance, found support from the 102.75 handle is now trading closer to 103.50.
Are we looking at a reversal in the making?
DXY is currently trading inside a possible bullish flag pattern just above the broken trend line resistance.
The index is also trading above the 4-hour chart's 100 and 200 SMAs, and the 100 SMA closing its gap against the 200 SMA suggests that a bullish SMA crossover may soon be in the works.
Keep close tabs on this week's retail sales and PPI releases for clues on DXY's direction.
Strong consumer spending and producer price inflation data would give the Fed more room to raise its interest rates further this year.
Increased dollar demand could then bust DXY above its 103.80 previous highs and push the index to previous areas of interest like 104.80 or 105.50.
But if this week's headlines encourage risk-taking instead, then the safe-haven dollar could lose pips across the board.
DXY could get rejected at 103.75 and head for its previous lows near 102.80 or 102.50 trend line support.
