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Unchanged Producer Price Index Causes Decline in U.S. Dollar

Unchanged Producer Price Index Causes Decline in U.S. Dollar

2011-09-14 15:28:00
Trang Nguyen,
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THE TAKEAWAY: U.S. Producer Price Index Unchanged > Raw-Material and Energy Costs Declined > U.S. Dollar Weakens

The report issued by the U.S. Bureau of Labor Statistics today showed that the Producer Price Index for finished goods remained unchanged in August, following the 0.2 percent advance in July. The index came in line with expectations of 0.0 percent, putting it 6.5 percent above its year-earlier level. The Producer Price Index excluding food and energy printed at 0.1 percent on month-over-month basis and 2.5 percent on year-over-year basis.

U.S. Producer Price Index, Monthly Change: January 2009 to Present

Unchanged_Producer_Price_Index_Causes_Decline_in_U.S._Dollar_body_Chart_2.png, Unchanged Producer Price Index Causes Decline in U.S. Dollar

Prepared by Trang Nguyen

The Producer Price Index for finished goods stayed the same in August as 1.1 percent advance in foods price and 0.1 percent increase for finished goods less foods and energy offset a 1.0 percent drop in finished energy goods price. Meanwhile, the index for intermediate materials, supplies and components plunged 0.5 percent, marking the first drop since July 2010. On the contrary, prices for foods and feeds advanced 1.7 percent. The price for crude material for further processing also moved up 0.2 percent.

USD/JPY 1-minute Chart: September 14, 2011

Unchanged_Producer_Price_Index_Causes_Decline_in_U.S._Dollar_body_Picture_4.png, Unchanged Producer Price Index Causes Decline in U.S. Dollar

Charts created using Strategy Trader– Prepared by Trang Nguyen

The one-minute USDJPY chart above illustrated traders’ bearish reaction regarding to the greenback after the Producer Price Index release. The USD/JPY traded in a narrow range between 76.79 and 76.83 before 8:30 AM Eastern Time as investors awaited for the figures coming out. However, the U.S. dollar immediately lost ground following the release and dropped from 76.82 yen to 76.66 yen. The Relative Strength Indicator (RSI), an oscillator indicating when a currency is overbought or oversold, fell below 30, signaling that traders massively sold the Dollar to buy the Yen in. A separated oscillator Stochastic Low also showed the same overbought reactions as both fast moving line and a moving average of the fast moving line below the 20 level. The index was unchanged since slow growth overseas and in the U.S. restrained raw-material and energy costs, reinforcing the fears among investors that the global economy would slowdown in coming months.

Written by Trang Nguyen, DailyFX Research Team

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

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