The US Dollar Index $DXY is finishing the day relatively unchanged.
Today’s much anticipated CPI print failed to move the needle for the greenback.
On the flip side, $DXY’s most significant component – the euro – is ripping toward a new year-to-date high.
Check out the EUR/USD pair completing a seven-month bullish reversal pattern, retesting its January high:
The path of least resistance now leads higher.
I like buying the euro against the 1.0958 breakout level, targeting 1.1250. But I'm out if the EUR/USD slips into its prior range.
A pop in the euro tends to weaken DXY since it makes up 56.7% of the index, acting as a bullish catalyst for stocks.
Yet the dollar continues to hold above last Monday’s low.
Plus, the buck moved in tandem with today's stock market averages – a throwback to early last week when everything plunged hand in hand except the yen and US Treasuries.
Markets continue to digest the recent spike in volatility. I expect a good old-fashioned chopfest until next month’s FOMC meeting.
Meanwhile, don’t overthink intermarket relationships. Be sure to trade what’s in front of you.
And, of course, buy breakouts!
–Ian
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