The Dollar Index plunged more than 1.5% after the release of the U.S. CPI, which indicated a softening in inflationary pressures. The market is reassessing the likelihood of further US interest rate hikes.
The Dollar Index was hit hard, falling over 1.5% after the release of the U.S. Consumer Price Index (CPI). The data pointed to easing inflationary pressures, leading the market to reassess the likelihood of further rate hikes in the U.S., suggesting that interest rates may have peaked.
In a counter-intuitive move, equity markets reacted positively to the subdued CPI numbers and closed higher. All eyes are now on the upcoming meeting between Chinese and US leaders in San Francisco for possible market implications.
Meanwhile, oil prices are in a state of uncertainty as the International Energy Agency downgrades the demand outlook for this quarter. The lower demand forecast comes amid surprising production growth from the U.S. and Brazil, which exceeded earlier projections.
Dollar Index
The U.S. dollar fell sharply after a disappointing inflation report fueled speculation that the Federal Reserve may pause its monetary tightening. The U.S. Consumer Price Index (CPI) for last month fell from 0.4% to 0.0%, below market expectations of 0.1%. This caused the Dollar Index to fall more than 1% against the major currencies as US Treasury yields plunged on the easing of rate hike expectations.
The Dollar Index is trading lower and is currently testing support. The MACD is showing increasing bearish momentum. However, the RSI is at 18, indicating that the index may enter the oversold territory.
Resistance level: 104.80, 105.40.
Support: 104.05, 103.30.
XAU/USD
The sharp depreciation of the U.S. dollar has led to a surge in demand for dollar-denominated gold, resulting in an extension of gold’s upward trajectory. Investors are closely watching the upcoming meeting between the US and China for any potential impact on market dynamics, as any positive developments in the relationship could redirect funds to riskier assets, which could hurt gold’s appeal.
Gold prices are trading higher as they test the resistance level. The MACD has illustrated increasing bullish momentum while the RSI is at 59, suggesting that the commodity may extend its gains as the RSI remains above its mid-line.
Resistance level: 1965.00, 1985.00.
Support: 1940.00, 1915.00.
THE EUR/USD
The EUR/USD pair has made a significant rise, breaking above its uptrend channel, indicating a strong bullish momentum in the market. Yesterday’s disappointing U.S. Consumer Price Index (CPI) was the catalyst for the bullish move. The data showed further easing of inflationary pressures in the U.S., leading to speculation that interest rates may have already peaked, and consequently putting downward pressure on the Dollar’s strength.
The price movement of the EUR/USD is showing a strong bullish trend as it has broken above its upward trend channel. The MACD continues to diverge above the zero line while the RSI has breached the overbought zone, indicating that the bullish momentum is strong.
Resistance level: 1.0954, 1.1040.
Support: 1.0775, 1.0700.
GBP/USD
The Cable experienced a robust trading session, rising nearly 1.8% after the release of the U.S. Consumer Price Index (CPI). The notable gain can be attributed to the weakening strength of the Dollar, driven by the U.S. CPI data pointing to controlled inflation and the Federal Reserve’s success in orchestrating a soft landing through its monetary tightening policy. The focus for cable traders now shifts to the upcoming release of the UK’s Consumer Price Index (CPI) later today, which is expected to cause potential fluctuations in the cable’s price movement.
The GBP/USD is trading with a bullish price pattern, indicating a bullish trend. The RSI has breached the overbought territory while the MACD continues to diverge above the zero line, indicating that the bullish momentum is strong.
