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The US Dollar Index plummeted on Tuesday, December 13, breaking below a major support following a softer-than-expected inflation report for November. This led to investors scaling back expectations for future Federal Reserve rate increases.
Since the initial drop after announcement was released, the price of the Dollar Index has recovered almost 80%. Although this could simply be the pullback phase of a longer-term downtrend.
A downtrend is an overall decrease in price, created by lower lows and lower highs which can clearly be seen on the daily time frame, marked out in the chart below.
This week’s CPI reading, combined with the technical analysis of the dollar index, suggests that the USD Index may continue to decline, with the next major support sitting around $102.25. The dollar index is currently retracing and testing a resistance zone between $104.40 and $104.90.
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