US Dollar Bounce Looks Vulnerable Amid Cooling Inflation Expectations
US inflation data came in line with expectations, which led to a 40% decline in expectations of a September rate hike from 55%. This development sent traders scrambling for positions, but the US dollar index surprisingly traded higher on Wednesday. However, according to Matt Simpson, this 'dollar bounce' may be vulnerable.
According to Simpson, the US dollar index has shown a lackluster effort in its retracement, with daily trading volumes remaining low and beneath their 20-day average. The index has been trading above the 50-week EMA and 200-day EMA, but momentum is still pointing lower from the January selloff.
The weekly chart shows a potential double top and bearish engulfing week forming around 100.50 in June. Simpson suspects that this may mark the completion of the correction from the January low, with momentum realigning with the selloff.