Sellers immediately attacked the dollar on Wednesday after U.S. consumer prices marginally increased by 0.1% in October – the smallest gain witnessed in three months.
Although the 0.1% increase in consumer prices was in line with market expectations, it continues to highlight how stubbornly low inflation in the United States remains a recurrent theme. While it is widely expected that the Federal Reserve will raise interest rates in December, the future path of rate hikes beyond 2017, is open to discussion amid low inflation concerns. On a positive note, U.S. retail sales unexpectedly rose 0.2% in October which is likely to boost sentiment towards the U.S. economy and offer some support to the tired dollar.
Taking a look at the technical picture, the Dollar Index dipped towards 93.40 following the release. The 94.00 level has the ability to transform into a dynamic resistance that could encourage a further decline towards 93.50 and 93.00, respectively. A solid breakout back above 94.50 threatens the current bearish setup.