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USDOLLAR at Key Resistance; Euro Hurt by Slipping Inflation Data

USDOLLAR at Key Resistance; Euro Hurt by Slipping Inflation Data

Christopher Vecchio, CFA,

Talking Points:

- Euro-Zone and German inflation data has disappointed the past two days, confirming one of our theses laid out in this week's Euro trading forecast.

- US Dollar on increasingly strong footing post-Jackson Hole, but needs ADP to shore up confidence pre-NFPs.

- August is typically a bad month for risk and a good month for the US Dollar - see the August forex seasonality report.

The US Dollar has been on a nice little run the past few days, bolstered by the synchronous message from Fed officials at the Jackson Hole Economic Policy Symposium that a rate hike is coming...soon. As markets grapple with the timing of such an event - flirting with September but comfortable with December as of now - it's clear that US Dollar bullish sentiment is fragile in its nascent stage.

Accordingly, with labor market data due out over the next two days, in particular, today's ADP Employment report (which tends to have a contemporaneous relationship with headline NFPs, not necessarily a leading indicator), investors will start to try and front-run Friday's report. Given how low participation rates are - it is the last unofficial week of the summer - an extreme reading today (terrible or extraordinary, just not Golidlocks) could spark volatility anew.

See the video (above) for technical considerations in EUR/USD, GBP/USD, AUD/USD, USD/JPY, and the USDOLLAR Index.

Read more: USDOLLAR Index Technicals Turning - EUR/USD, USD/JPY Key

--- Written by Christopher Vecchio, Currency Strategist

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Follow him on Twitter at @CVecchioFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.