US Dollar Index clings to gains near 96.80 despite CPI

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  • The index rebounds from lows and returns to the 96.70/80 band.
  • US Core CPI rose at a monthly 0.1% during May.
  • Yields of the US 10-year note dropped to sub-2.12% area.

The greenback is now trading on quite a volatile fashion, with the US Dollar Index (DXY) meandering the 96.60/80 range.

US Dollar Index choppy after CPI misses consensus

The index dropped to fresh lows in sub-96.60 area after US inflation figures measured by the headline CPI surprised to the downside in May, rising 0.1% from a month earlier and 1.8% over the last twelve months.

In addition, consumer prices excluding energy and food costs – Core CPI – rose 0.1% inter-month and 2.0% on a yearly basis.

In the meantime, despite market chatter regarding the probability of a Fed’s rate cut in the next months continue to dominate the scenario among investors, it seems the downside in the buck has subsidized somewhat as of late.

Later in the session, the EIA will publish its weekly report on US crude oil stockpiles.

What to look for around USD

Markets’ idea of a probable rate cut by the Federal Reserve in the near to medium term (insurance cut?) have been underpinned by poor data from the labour market and producer/consumer prices. However, and in spite of the recent results, the labour market remains strong, wage growth keep pushing higher and the overall economy looks healthy – specially when we consider the weakness in overseas economies – all begging the question whether current speculations of rate cuts are not overdone. In addition, US-China trade jitters remain everything but abated so far, shifting the focus of attention to the upcoming G20 meeting in Japan, where the issue should take centre stage.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.06% at 96.77 and faces the next resistance at 96.98 (100-day SMA) seconded by 97.42 (55-day SMA) and finally 97.87 (61.8% Fibo of the 2017-2018 drop). On the flip side, a break below 96.46 (low Jun.7) would open the door for 96.04 (50% Fibo of the 2017-2018 drop) and then 95.82 (low Feb.28).

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