USD Index puts 103.00 to the test ahead of US CPI

The index extends the decline and challenges 103.00.
US inflation figures is expected to have retreated further in December.
US yields trade slightly on the defensive on Thursday.

Pablo Piovano FXStreet

The greenback, when tracked by the USD Index (DXY), adds to Wednesday’s tepid losses and pokes with the 103.00 neighbourhood on Thursday.

USD Index looks at US CPI

The index drops for the second session in a row on Thursday and probes the 103.00 support on the back of the generalized flat sentiment in the global assets.

Indeed, prudence prevails among market participants ahead of the release of crucial US inflation figures for the month of December..

These results have grown in importance in past sessions, particularly after the release of the US labour market report on January 6, amidst increasing speculation of a potential pivot in the Fed’s monetary tightening.

Other than the publication of the CPI, weekly Initial Claims are also due as usual along with the Monthly Budget Statement.

What to look for around USD

The dollar remains under pressure and trades in a side-lined fashion near the 103.00 yardstick amidst investors’ prudence and ahead of US CPI due later in the session.

The mixed results from the US Nonfarm Payrolls for the month of December (Friday) seem to have reignited the idea of a probable pivot in the Fed’s policy in the next months, which comes in contrast to the message from the latest FOMC Minutes, where the Committee advocated the need to remain within a restrictive stance for longer, at the time when it ruled out any interest rate reduction for the current year.

Furthermore, the tight labour market, still elevated inflation and the resilient economy are also seen supportive of the firm message from the Federal Reserve and its hiking cycle.

Key events in the US this week: Inflation Rate, Initial Jobless Claims, Monthly Budget Statement (Thursday) – Flash Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is retreating 0.03% at 103.22 and the breach of 102.94 (monthly low January 9) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level). On the other hand, the next up barrier comes at 105.63 (monthly high January 6) followed by 106.38 (200-day SMA) and then 107.19 (weekly high November 30).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

EUR/USD looks vacillating around 1.1800

EUR/USD alternates gains with losses around the 1.1800 neighbourhood amid marginal gains at the end of the week. The pair’s tepid move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the irresolute price action in the US Dollar.

GBP/USD slips back to daily lows near 1.3450

GBP/USD trades on the back foot on Friday, adding to Thursday’s losses around the 1.3450 region. Cable’s move lower comes amid the lacklustre performance of the Greenback in a context of a wide spread absence of volatility.

Gold flirts with four-week highs past $5,200

Gold adds to the ongoing recovery, up for the third day in a row and surpassing the $5,200 mark per troy ounce on Friday. The relentless uptick in the precious metal remains bolstered by steady geopolitical tensions and persistent uncertainty surrounding the US trade policy.

Bitcoin, Ethereum and Ripple consolidate with short-term cautious bullish bias

Bitcoin, Ethereum and Ripple are consolidating near key technical areas on Friday, showing mild signs of stabilization after recent volatility. BTC holds above $67,000 despite mild losses so far this week, while ETH hovers around $2,000 after a rejection near its upper consolidation boundary.

Changing the game: International implications of recent tariff developments

The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.