Dollar Probing 10-Month High

04/19/2019 4:43 am EST


Matt Weller, CFA, CMT

Senior Analyst,

Retail sales report shows U.S. dollar is strongest currency on world stage.

Foreign exchange traders were casting a wandering eye ahead toward a long holiday weekend this morning, but the U.S. retail sales report pulled their attention back to their monitors.

After a disappointing 0.2% monthly drop in February, U.S. retail sales surged 1.6% in March, with “core” sales (ex-automobile purchases) also coming in strong at 1.2% for March. The stellar reading on the U.S. consumer, combined with disappointing manufacturing data out of Germany and France, has reinforced the “best house in a bad global neighborhood” trade for the U.S. economy and taken the U.S. Dollar Index up to test key resistance at its 10-month high in the mid-97.00s:

Dollar Index
Source: TradingView,

From a technical perspective, the U.S. Dollar Index is showing a large ascending triangle pattern, which could foreshadow an explosive rally if the 97.70 barrier is eclipsed. That said, with many financial centers out on holiday tomorrow and on Monday, the lack of news flow could keep the dollar index contained for now.

Looking ahead to next week, next Friday’s advance Q1 GDP report will be the marquee event. After today’s blowout retail saes report, the Atlanta Fed’s GDPNow model is pointing toward a 2.8% annualized growth rate in Q1; a reading in that range could be the catalyst for a big bullish breakout in the greenback next week.

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