US Dollar Price Analysis: DXY fate lies in US CPI

Ross J Burland FXStreet

The US Dollar is sitting in a technical bundle of key structures that has something for both the bulls and bears ahead of the release of US inflation data and the final Federal Reserve meeting of the year.

Traders are looking for signs of a Fed pivot, i.e., for its policy outlook to change course from its currently contractionary (tight) monetary policy to expansionary (loose).

A Fed pivot typically happens when economic conditions have fundamentally changed in such a way that the Fed can no longer continue its prior policy stance and the US Consumer Price Inflation data is used as a primary gauge in that respect. In fact, the DXY's biggest daily drop and second-largest daily gain in 2022 have come on the back of prior CPI data.

The Fed is widely expected to hike the funds rate by 50 basis points (bp) on Wednesday, after four consecutive 75 bp hikes. If the data comes in hotter than expected, this will be problematic for the Fed eager to slow the pace of tightening and potentially weigh on risk assets and thus lead to a stronger US Dollar.

The headline is expected at 7.3% YoY vs. 7.7% in October, while the core is expected at 6.1% YoY vs. 6.3% in October. Last week, the Producer Price Index came in higher than expected, raising concerns that inflation is likely to prove to be much stickier than the markets are pricing.

DXY technical analysis

The trendline was broken and the bulls are on the back side of it. If the data comes in hot, a move beyond the 50% mean reversion resistance near 1.05.65 could spell an upside correction continuation scenario for the near future. On the flip side, 103.00 will be a key target for the remaining weeks of the year should a Fed pivot be priced in even further.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD struggles to regain momentum in the low1.1600s

EUR/USD is giving some signs of life in the aftermath of two severe days of losses on Wednesday, reclaiming the 1.1600 hurdle and above on the back of the resurgence of a mild selling bias around the US Dollar. Moving forward, the usual US weekly Claims will take centre stage on Thursday ahead of Friday’s crucial NFP data.

GBP/USD appears bid around 1.3370

GBP/USD reverses part of its recent multi-day decline, gathering some balance and managing to reach the 1.3400 region, where some initial resistance seems to have turned up. Cable’s uptick comes in response to some loss of momentum in the Greenback despite the geopolitical scenario remaining fragile.

Gold recovers modestly despite intensifying Middle East crisis

Gold keeps its daily gains well in place, although a break above the $5,200 mark per troy ounce still remains elusive on Wednesday. The yellow metal’s rebound comes in response to the persistent flight-to-safety amid intense geopolitical tensions in the Middle East and the bearish performance of the US Dollar.

XRP rises alongside peers as ETFs attract inflows

Ripple (XRP) is gaining upside momentum, trading above $1.40 at the time of writing on Wednesday. The remittance token is rising in tandem with major crypto assets, including Bitcoin (BTC), which has crossed above the pivotal $70,000 level, and Ethereum (ETH), which is holding above $2,000.

First Venezuela, now Iran: The US-China energy war escalates

At first glance, the latest escalation involving the United States with both Iran and Venezuela looks like another chapter in a long-running geopolitical story. But viewed through a broader strategic lens, something else may be unfolding: Energy.

Bittensor extends recovery despite retail demand slump

Bittensor, a leading Artificial Intelligence token, is aging up above $190 at the time of writing on Wednesday. Steady price increases characterise the broader crypto market, with Bitcoin holding above $71,000 and Ethereum above $2,000.