Fawad Razaqzada
TradingCandles.com
After yesterday’s testimony from Jay Powell, the dollar fell as the Fed Chair more or less confirmed interest rates are going to be cut. Traders are now looking forward to this afternoon’s release of US consumer inflation figures before deciding whether to increase the pressure on the dollar or ease off the gas. The Consumer Price Index is expected to come in at 1.6% year-over-year, down from 1.8% in May, while core CPI is seen unchanged at 2.0% in June. On a month-over-month basis, both headline and core CPI prints are expected at +0.2% vs. +0.1% previously.
Ahead of the publication of CPI, the dollar has managed to bounce off its worst levels, with the USD/JPY for example climbing to 108.15 after dipping to 107.85 overnight. Undoubtedly, some speculators are happy to book profit on their short dollar positions in the event CPI comes out stronger than expected. But given the Fed’s desire to cut interest rates and the technical damage incurred on most dollar charts, the path of least resistance remains to the downside for the buck. So, as things stand, we favour looking for rallies to be faded and supports to break down.
The USD/JPY created a bearish engulfing candle on its daily chart yesterday, and we have already seen some downside follow-through. The key level to watch is around 108.25/35, as can be seen on the hourly chart. As well as prior support, which has now broken down, this is where the back side of the bearish trend line comes into play. So, any move back into this level could be faded today, unless CPI beats expectations by a meaningful margin.
Figure 1:
Source: Trading View and FOREX.com
Figure 2:
Source: Trading View and FOREX.com
Trading leveraged products such as FX, CFDs and Spread Bets carry a high level of risk which means you could lose your capital and is therefore not suitable for all investors. All of this website’s contents and information provided by Fawad Razaqzada elsewhere, such as on telegram and other social channels, including news, opinions, market analyses, trade ideas, trade signals or other information are solely provided as general market commentary and do not constitute a recommendation or investment advice. Please ensure you fully understand the risks involved by reading our disclaimer, terms and policies.
Recommended Content
Editors’ Picks
AUD/USD rises to two-day high ahead of Aussie CPI
The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table. The AUD/USD trades at 0.6488 as Wednesday’s Asian session begins.
EUR/USD holds above 1.0700 on weaker US Dollar, upbeat Eurozone PMI
EUR/USD holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for the pair.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Ethereum ETF issuers not giving up fight, expert says as Grayscale files S3 prospectus
Ethereum exchange-traded funds theme gained steam after the landmark approval of multiple BTC ETFs in January. However, the campaign for approval of this investment alternative continues, with evidence of ongoing back and forth between prospective issuers and the US SEC.
Australia CPI Preview: Inflation set to remain above target as hopes of early interest-rate cuts fade
An Australian inflation update takes the spotlight this week ahead of critical United States macroeconomic data. The Australian Bureau of Statistics will release two different inflation gauges on Wednesday.