COMMENT-Dollar rebound needs firm CPI and range above kijun to continue

The USD index needs Thursday's CPI to affirm Fed speaker warnings to markets regarding rapid rate cut pricing to clear last week's peak and advance on key resistance by the Dec. 13 Fed day highs.

Its recovery from December's oversold lows was capped on Friday by key resistance and contradictory U.S. jobs data.

The dollar's recovery has been a partial correction of aggressive rate cut pricing by markets since the dovish December Fed meeting and further disinflation indicators.

That correction nearly retraced 38.2% of the late 2023 slide at 103.18 with Friday's fleeting 103.10 peak. A daily range above the kijun at 102.44 would confirm a bullish reversal.

If Thursday's U.S. CPI reinforces the message from most Fed speakers since the December meeting that rate cut pricing is premature absent further core disinflation or labor market loosening, particularly amid drastic easing of financial conditions into year's end, the 103.18 resistance is likely to be retested.

Given futures foresee nearly twice as many cuts as the three in December's dot plots, and the haven dollar would be further supported by a risk-off rebound in rates, inflationary data could see the Dec. 13 index highs by 50% of the October-December dive by 104 reached.

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