The US dollar index keeps rounding above the 103.60 historical support level. The buyers have already defended this level for three weeks, highlighting their interest in the greenback. Thus, buying USD looks less risky right now.
The US CPI is out: will the USD grow?
The US monthly CPI is announced on Tuesday at 15:30 MT time.
Instruments to trade: EUR/USD, USD/CAD, USD/JPY, GBP/USD
In the current circumstances, the CPI is a direct indicator of the US economic recovery. After a slump to 255.768 in April-May, it has been only increasing throughout the next three months to come to the current 259.681. This level is even higher than the last pre-virus high of 259.05 which is a good sign. Now, the question is whether the US economy will keep the pace of recovery. If it does, it will be taken as a positive sign by the market, and the USD may rise on that. Otherwise, weak consumer price data may indicate a slowdown and send the USD into a bearish phase.
- If the CPI exceeds expectations, the USD will rise.
- Otherwise, the USD will fall.
On the H4 timeframe, the US dollar index has formed a bullish falling wedge. At the beginning of the trading session, the price is testing the upper border of this wedge. Thus, in case of a higher-than-expected Core PCE Price Index m/m, the US dollar will skyrocket against other currencies.
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This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.