The US Dollar takes a blow with a miss in PPI numbers.

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• The US Dollar takes a blow with a miss in PPI numbers.
• Traders see tensions in the Middle East head an echelon higher with UK and US bombing Houthi rebels.
• The US Dollar Index steadies at 102 and is going nowhere for now.

The US Dollar (USD) is receiving quite the blow from the Producer Price Index (PPI) numbers. The numbers are in contradiction against the Consumer Price Index (CPI) numbers from Thursday where an uptick was noticed in the headline inflation. The current print in US PPI numbers is undershooting on nearly all estimates and reveals a bit of a gap on what the end consumer is paying versus what the actual producer is paying for it.

Meanwhile on the world stage all eyes are on the Middle East after a UK-US task force fired around 60 rockets on Houthi controlled installations in Yemen. Meanwhile Houthi rebels have issued warnings that retaliation will be iminent and will take place soon against any UK or US ship or entitity. Tensions are rising in the region yet again since December and have their repercuttions in the energy complex with both Crude ant Natural Gas jumping higher.

The US Dollar Index (DXY) is stuck in a rut, and is not going anywhere it seems, even with recent inflation numbers not providing fuel for the DXY to jump back above 103. From a pure technical point of view, lower lows are coming in, while a sort of floor is forming, pointing to a descending triangle. Pressure is building and once the floor, around 102 snaps, it seems a given that the DXY will tank towards 101.

The first level on the upside to watch is 102.70, which falls nearly in line with the trend line from the top of October 3 and December 8. If broken and closed above, the 200-day Simple Moving Average (SMA) at 103.43 comes into play. The 104.00 level might be too far off, with 103.63 (55-day SMA) coming in as the next resistance.

A rejection by the descending trendline will give fuel to Greenback bears leading to a further downturn. The line in the sand here is 101.74 – the floor which held halfway through December before breaking down in the last two weeks. In case the DXY snaps this level, expect to see a test at the low near 100.80.

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