Hiyo forex peeps! In today’s FX feature is an update on the US dollar index (please see my my previous post here). As you can see from its daily chart, the index appears to be poised for a break to the upside. Why? Well, the index has recently broken above its downtrend line and at present it seems to be forming and inverted head and shoulders formation. As you know, such formation is a bullish reversal pattern. Hence, a move above its neckline could send it all the way to 86.000 (minimum upside target as gauged by projecting the height of the formation from the point of potential break out). A failure to move past the neckline, however, could cause it to just trade sideways or even to fall back to its previous low at 80.085.
Well, the recent tentativeness in the global markets have caused a lot of investors to flee back to the safety of the greenback. Economic 101 states that a price of an asset goes up as a result of an increase in the… wait for it… demand. For today, the notable US economic release will be the country’s Philadelphia Fed Manufacturing Index for the month of August. While the index is projected to rise to 7.1 from 5.1, if you look at the previous results, for three months now it had fallen short of the market’s consensus. The US’s weak retail sales for July could have carried over to August as a result of the waning confidence in the markets. If this is so then there could be another flight of risk aversion which could lead the market back to the open arms of the USD. Watch out for its release at 2:00 pm GMT today!