- US Dollar accelerates after US PPI, ahead of FOMC decision.
- Higher US bond yields supporting greenback.
- DXY up for the seventh day in a row.
The US Dollar accelerated to the upside during the American session. It trimmed losses against commodity currencies and printed fresh highs versus the euro, the Swiss franc, and the yen. It gained momentum after the release of US economic data.
The Producer Price Index rose in November 0.4%, above the 0.3% expected. The annual rate climbed to 3.1%, the highest level since February 2012. Tomorrow the Consumer Price Index will be released but attention will be on the FOMC meeting. A rate hike from the Fed is expected and attention is likely to be on the updated economic projections (dot plot) and Yellen’s press conference. The current momentum of the US dollar could need some hawkish tone from Fed to continue.
Higher US yields were offering support to the greenback on Tuesday. The 10-year bond yield hit a 1-week high at 2.41%, after opening the day at 2.38%. In Wall Street, the Dow Jones was up 0.40% after reaching a new record high at 24,500.
DXY above 94.00, testing key level
The US Dollar Index rose from 93.85 to 94.16, reaching the highest level since November 14. As of writing, it was holding near the top, with the upside momentum intact. The DXY is consolidating on top of the relevant 94.00 zone and is testing a downtrend line from March highs. The mentioned line was tested back in November before the DXY turned to the downside. A breakout could open the doors to more gains.
If the index fails at current levels it could point to some exhaustion to the upside and to a potential top. Now 94.00 is the immediate support followed by 93.70 (Dec 12 low) and 93.45 (Dec 4 high / Dec 7 low).
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