US Dollar Declines on Softer US CPI Inflation Data

  • Market Overview

US Dollar declines on softer CPI inflation data

Consumer Price Index (CPI) data out of the US was a slight miss on consenus and drop from the previous months reading. The CPI and Core CPI data shows that inflation while continuing to be high in the world’s largest economy, is starting to show some signs of easing, albeit marginally.

A summary of the CPI data is as follows:

CPI +0.3% month on month (m/m), previous +0.5%

CPI +5.3% year on year (y/y), previous 5.4%

Core CPI +0.1% m/m , previous +0.3%

Core CPI +4.3% y/y , previous +4.3%

The stabilization of prices (along with employment) remains a key focal point of the Federal Reserve’s mandate. The central bank has suggested that the current (and still) high levels of inflation are transitory in the wake of a ‘post’ pandemic recovery.

The slight easing of inflation being reported has been met with an initial softening of the US dollar as it lowers the level of pressure towards the tightening of monetary policy.

US Dollar Basket – Technical Analysis

Dollar Daily
Source: IG Charts

The US Dollar Basket looks to have reversed off resistance of range support at 93.00. Should the downside momentum hold, 91.80 becomes the initial support target from the move.

Source: IG Charts

After an intraday break of the 1.1795 support level, the EUR/USD has posted a sharp reversal off this level. Traders who are long might target a move towards 1.1895, while using a close below the 1.1795 level as a stop los indication for the trade.

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