US Dollar Talking Points:
This morning introduced the discharge of CPI numbers out of the United States for the month of September and just like what’s been exhibiting of latest, Core CPI, stripping out meals and power remained sturdy whereas headline CPI continued beneath the two% marker.
On the energy aspect of the equation, Core CPI adopted up final month’s shocking print at 2.four% with one other 2.four% learn; which got here in proper at the expectation. This marks now the 19th consecutive month with Core CPI printing above the two% threshold and this additionally highlights how inflation could stay on an upward trajectory contemplating the 2 very latest cuts from the FOMC. Core CPI started to tilt-higher after bottoming out in May at 2%, and continued to extend by means of June and July, earlier than the Fed had began to chop charges once more.
This could also be another excuse for the Fed to carry charges at the October charge determination, probably dampening hopes for one more lower at the FOMC assembly later this month. While development pressures stay pretty seen, the argument might be made that not sufficient time has but transpired for these two latest charge cuts to transmit by means of financial knowledge.
US Core CPI Since April, 2018
Chart ready by James Stanley
On the opposite aspect of the coin, headline CPI disillusioned barely, printing at the identical 1.7% as final month versus an expectation of 1.eight%. This indicator has been pretty steady since final yr’s fall from just below three% to beneath 2.
US Headline CPI Since April, 2018
Chart ready by James Stanley
US Dollar Finds Support After Bearish Push
Ahead of this morning’s knowledge the US Dollar was selling-off, helped in-part by some much less dovish remarks within the ECB assembly minutes across the Euro. This helped EUR/USD to break-above that confluent zone of resistance across the 1.1000 deal with that had helped to carry the highs over the previous week and, correspondingly, the US Dollar broke-down to recent near-term lows, discovering bids simply above final week’s swing-low.
The huge query round EUR/USD at the second is whether or not bulls can keep this morning’s breakout, and the CPI launch could assist to verify or deny this thesis. EUR/USD value motion has damaged out to recent two-week-highs and that prior space of resistance at 1.1000 can be utilized for higher-low assist situations. Should USD-strength proceed to price-in on the again of this morning’s CPI report, a maintain of that assist at prior resistance can open the door for bullish pattern methods, on the lookout for patrons to proceed pushing-higher on the charts.
EUR/USD Four-Hour Price Chart
Can USD Bulls Take-Over?
Taking a step again to look at the massive image, the first query proper now’s whether or not we’re ready the place US Dollar bulls could make extra of a mark. The US foreign money has remained bid by means of 2019 commerce, together with Q3 when the FOMC started slicing charges once more. But, the style by which the financial institution has to this point moderated coverage has left merchants on the lookout for indicators or clues or innuendo of what’s to return subsequent, because the FOMC has framed each charge cuts up to now as ‘insurance rate cuts.’
That, mixed with the extreme give attention to the matter of each USD value motion and FOMC financial coverage from President Trump, and a bearish reversal formation has constructed within the Greenback this yr. Buyers are shy or trepidatious at-or-around highs whereas being extra aggressive round lows. This has produced a rising wedge formation which is able to typically be approached with the purpose of a bearish flip, on the lookout for that lack of enthusiasm from bulls round resistance or recent highs to, finally, push by means of for a break of assist.
US Dollar Daily Price Chart
On a shorter-term foundation, the massive query is whether or not this morning’s CPI knowledge can carry a long-lasting response within the Greenback. Prices are at the moment bouncing from final week’s lows, across the 98.65 stage on DXY and a focus will possible flip in direction of tomorrow’s launch of Consumer Sentiment Data out of the University of Michigan for that subsequent clue on forward-looking efficiency of the US economic system.
US Dollar Four-Hour Price Chart
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— Written by James Stanley, Strategist for DailyFX.com
Contact and comply with James on Twitter: @JStanleyFX