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US Inflation Key This Week
We’re seeing quiet trading across the board on Tuesday as traders brace for tomorrow’s headline CPI data. The reading will be pivotal in determining USD direction over the next month as traders look to the gauge to signal whether we’re likely to see Fed easing in September. A recent downturn in US data has put easing expectations back in focus with April US labour market data undershooting forecasts and advanced Q1 GDP seen missing forecasts also. Traders have since pulled their easing projections forward to September from November prior. If tomorrow’s data shows a fresh drop in inflation, this will be seen as bolstering the chances of an earlier cut in September, leading USD lower near-term while driving risk assets higher.
PPI Due
Ahead of tomorrow’s CPI data, traders will today see the latest US PPI data which no doubt will be taken as an indicator of how tomorrow’s release is likely to go. On the numbers front, the market is looking for headline PPI to rise to 0.3% from 0.2% MoM with core expected to hold steady at 0.2%. If any undershoot is likely to weigh on USD ahead of CPI tomorrow with any upside likely to see USD bid into the release.
Powell on Deck
Finally, we will also hear from Fed chairman Powell today. We’re unlikely to hear anything too market moving ahead of tomorrow’s CPI release with Powell instead likely to reiterate recent signalling. These comments are likely to fall a little on the dovish side, however, meaning that if we do see a drop in inflation tomorrow, the stage is set for a decent slide in USD.
Technical Views
DXY
The correction lower in DXY has stalled for now into a test of the 104.95 level. While this support holds, and price remains within the bull channel, the focus is on a continuation higher and a test of the 107.04 resistance next. To the downside, any break lower will test the bull channel lows ahead of next structural support at 103.48.
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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.