The US Dollar holds on to gains for the week
The US Dollar (USD) is taking a small step back for a second day in a row as selling pressure materializes just hours before the very important US Consumer Price Index (CPI) publication. Where on Wednesday traders kept sitting on their hands, some frontrunning is underway as expectations mount for a substantial lower inflation performance. Risk at hand often with these early intraday moves, is that these moves become perfect playbook strategies to buy-the-rumor-sell-the-fact and would result in a knee jerk reaction and stronger Greenback.
The focal point today is at 12:30 GMT, when all metrics of the US Consumer Price Index (CPI) are about to be released to the markets. At that same time, we will see the weekly jobless statistics. The cherry on the cake is right at the end at 19:00 GMT when Federal Reserve (Fed) speakers Raphael Bostic from Atlanta and Patrick Harker from Philadelphia are due to speak and comment on Thursday’s inflation numbers and what they could mean for the central bank’s September policy meeting. The US Dollar is giving US Dollar bulls a hard time after a good start of the week, while gains are starting to evaporate since Wednesday. Meanwhile, the US Dollar Index (DXY) is back at the lower support level that will be crucial on where the DXY will close this week. Expect the US CPI numbers to act as catalyst for any move and look for technical levels to confirm if the breakout is substantial or short-lived.
For the upside, 102.42 – where the 55-day Simple Moving Average (SMA) is located – is again in play on the upside. This level needs to be broken yet again and needs to see a full daily close above before starting to think about 103. To do so, the double peak near 102.80 needs to be broken as well and print a new monthly high. On the downside, bears have already breached the defence line of the US Dollar bulls at 102.31 - at the 100-day SMA - earlier this Thursday. Should the US CPI numbers support a weaker Greenback, expect to see some sharp losses in a few specific pairs or crosses against the USD. Expect 102 to come under pressure, and once the low of last week at 101.75 gets breached, expect this to be the end of the DXY rally for now.
For the upside, 102.42 – where the 55-day Simple Moving Average (SMA) is located – is again in play on the upside. This level needs to be broken yet again and needs to see a full daily close above before starting to think about 103. To do so, the double peak near 102.80 needs to be broken as well and print a new monthly high. On the downside, bears have already breached the defence line of the US Dollar bulls at 102.31 - at the 100-day SMA - earlier this Thursday. Should the US CPI numbers support a weaker Greenback, expect to see some sharp losses in a few specific pairs or crosses against the USD. Expect 102 to come under pressure, and once the low of last week at 101.75 gets breached, expect this to be the end of the DXY rally for now.