Dollar Index In the Crosshairs Ahead of US CPI Data
Ahead of today’s US CPI release, the US Dollar Index is hovering just north of major support coming in at 104.78, and is seen testing the grip of channel support, extended from the low of 105.21. These are important barriers to monitor.
Inflation Expected to Slow
A broad miss in the data today will likely weigh on the US dollar (USD), potentially pushing the Dollar Index through current support toward another, more local, support level at 104.48. You may recall that the Fed is not pursuing policy firming at the moment, and it would take a sizeable upside deviation in the data to begin to alter that view.
With economists expecting the year-on-year CPI measures to slow, with headline expected to cool to 3.4% in April from 3.5% (March) and core to slow to 3.6% from 3.8% over the same period, sellers will likely be looking for +3.3% (headline) and +3.5% (core) to get them excited which should see a strong downside move in the USD.
Upside Surprise?
Of course, a surprise to the upside is still not off the table. However, it would need a more sizeable beat to interest market participants. Traders will likely need a +3.6% beat in the headline number and a +3.8% number in the core measure to see the buck underpinned. A release such as this could have sufficient fuel behind it to drive price action towards channel resistance, taken from the high of 105.74.
DISCLAIMER:
The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.
Inflation Expected to Slow
A broad miss in the data today will likely weigh on the US dollar (USD), potentially pushing the Dollar Index through current support toward another, more local, support level at 104.48. You may recall that the Fed is not pursuing policy firming at the moment, and it would take a sizeable upside deviation in the data to begin to alter that view.
With economists expecting the year-on-year CPI measures to slow, with headline expected to cool to 3.4% in April from 3.5% (March) and core to slow to 3.6% from 3.8% over the same period, sellers will likely be looking for +3.3% (headline) and +3.5% (core) to get them excited which should see a strong downside move in the USD.
Upside Surprise?
Of course, a surprise to the upside is still not off the table. However, it would need a more sizeable beat to interest market participants. Traders will likely need a +3.6% beat in the headline number and a +3.8% number in the core measure to see the buck underpinned. A release such as this could have sufficient fuel behind it to drive price action towards channel resistance, taken from the high of 105.74.
DISCLAIMER:
The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.
Comment:
Dovish reaction is seen - major support breach at 104.78 with the unit now reacting from additional support at 104.48.