USD Softens As Traders Await Key Inflation Data
Inflation Up Next
The Dollar is on watch today as traders brace for the latest set of US inflation readings due this afternoon. Ahead of the data USD is cooling a little with the DXY pulling back further from yesterday’s highs, suggesting some trepidation that we might see a cooler print today. On the numbers front, the market is looking for headline annualised inflation to print 3.6%, up from 3.4% prior with core expected to rise to 2.5% from 2.4%. If we do see an increase today this should boost October tightening expectations though the consensus view is still for a hold this month and a hike in December. If data tops forecasts this could see USD rallying firmly as October hike pricing jumps, adding more uncertainty into the near-term picture.
Downside Risks
On the other hand, if data undershoots forecasts today, particularly if we see a drop from the prior month’s reading, this should fuel a sharp dovish repricing in the rates outlook putting pressure on USD. With rate hike pricing for December up above the 80% mark, there is plenty of room for a USD pullback if that pricing suddenly drops down close to the 50% level again. As such, today’s data holds plenty of volatility risk, with the bigger moves likely to be seen on the downside if we get an undershoot in the data.
Technical Views
DXY
The rally in the index has stalled for now on the first pass above the 101.91 level. However, while price holds above that level, focus is on a continuation higher towards the 103.20 level next. Momentum studies readings are showing strong bearish divergence here, however, warning of a possible reversal. If we do break back below the 101.91 level, we have some trend lien support to watch ahead of the key 100 marker.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% and 74% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.