The dollar index has traded higher throughout the day, retracting from .18 percent. Data out of the US showed positive signs in both initial jobless claims and gains in the gross domestic product.
Initial jobless claims decreased last week by 10K to 311K in the week ending on March 22, according to the Labor Department. This was nearly a four-month low and beat analyst expectations of 326K jobless claims. The previous data was revised up 1K to 321K. The four-week average of claims filled has dropped to lows not seen since September.
Continuing jobless benefits fell by 53K to 2.82 million in the week ending on March 15. This was, also, a multi-month low.
Gross domestic product in the fourth quarter was revised higher – for the last time – from an annualized rate of 2.4 percent to 2.6 percent from October through December. However, this came in lower than economists forecasted. The higher revision was due to consumer spending increasing by the most in three years.
The dollar index has been very choppy since the price run-up after the FOMC announcement on March 19. Price action has had a wide range of activity, holding primarily between 80 and 80.40. The 4H chart is showing an opportunity to trade a pennant technical pattern. This pattern is essentially a symmetrical triangle that is a attached to a large spike up in price action.
The upside potential is tough. A break through the resistance trend line will bring on immediate resistance of 80.4, but the momentum behind the move could likely push price action through 80.60.
The downside potential can see a hasty move lower. Price action has meandered and consolidated after the huge squeeze higher. The lack of conviction in traders to continue to move it higher usually ends in a breakdown of trend. There will be support within the pennant at the 200 EMA prior to a break of the support trend line at 80.12. A downside projection, supported by price action, is seen at 79.62.
The key will to use a momentum and trend strength filter. The +/- DMI will help indicate price action sentiment, while the ADX will indicate momentum strength. Be patient for the right setup and trigger.