The U.S. dollar index collapsed after a report showed April advance retail sales showed no change, well shy of the 0.2% gain that was expected. The report supports the idea that US economy could be slowing down and that may support dovish bets that the Fed might need to wait beyond September to raise interest rates.
The dollar index daily chart shows that after the key release, price dropped from 94.53 to 93.66 and made a fresh three-month low. This decline comes after price consolidated for two-weeks and failed to recapture the 100-day SMA. The greenback now may not see any major support until the 90-90.50 region which is both the 50.0% Fibonacci retracement of 78.93 to 100.78 rally and the 200-day SMA.
In the event we see price respect the 38.2% Fibonacci retracement level, further upside may be capped by the 96.00 handle. Only consecutive daily candle closes above that level will support a move higher.
The trade: Sell US Dollar Index at 93.80 with a stop loss at 94.20 and a take profit a 92.60. The Risk/Reward Ratio is 1:3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading