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US Dollar Holds the High Ground as Inflation Shocker Provides Headaches for the Fed

US Dollar Holds the High Ground as Inflation Shocker Provides Headaches for the Fed

Daniel McCarthy, Strategist

US Dollar, USD, DXY Index, BoC, CAD, USD/JPY, AUD - Talking Points

  • The USDollar remains near multi decade high after huge CPI beat
  • APAC equities nudged higher while commodities steadied after recent losses
  • The market is now eyeing the upcoming Fed meeting. Will a big hike boost USD?

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The US Dollar has maintained lofty levels after headline CPI registered 9.1% year-on-year to the end of June. The market now has expectations of the Fed raising rates by 100-basis points (bps) at their meeting later this month.

This would match the 100-bps added by the Bank of Canada yesterday that saw the Canadian Dollar find some support.

The Japanese Yen continues to slide with USD/JPY making a 24-year high above 138.00 after poor industrial production and capacity utilisation figures.

The Australian unemployment rate for June came in at 3.5% against 3.8% forecast and 3.9% previously. The overall change in employment for the month was a massive 88.4k instead of 30k anticipated but the Australian Dollar was little changed on the news.

Gold remains steady near US$ 1,730 an ounce and crude oil has held onto recent gains. The WTI futures contract is nearing US$ 97 bbl while the Brent contract is above US$ 100 bbl. Aluminium, copper, iron ore and tin have all held steady today.

APAC equities are all slightly in the green despite a soft lead from Wall Street. US equity futures are currently pointing to a soft open for their cash session.

Looking ahead, the US will get PPI data as well as initial jobless claims.

The full economic calendar can be viewed here.

USD Forecast
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US Dollar (DXY) Index Technical Analysis

The US Dollar (DXY) index continues to press higher as it approaches the October 2002 peak 108.74 that has so far provided some resistance and might continue to do so.

Bullish momentum appears to be intact when looking at all short, medium and long-term Simple Moving Average (SMA). They all have positive gradients and lie below the price in sequential order according to their tenor.

Nearby support could be at the 10-day SMA, which is currently at 107.05 or at the breakpoint of 105.79.

USD CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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

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