-1719569308.png)
USD On Watch
All eyes are on the US Dollar today as traders brace for the release of the latest US Core PCE data. Given its importance to the Fed in calculating overall inflation, the reading is often used as a key barometer for how the Fed is likely to proceed with monetary policy. Currently, the big question for traders is whether the Fed is likely to ease rates in September or wait until later in the year. Despite two consecutive months of cooler inflation, the Fed recently cuts its rate-cut projections down from three this year to one, alongside an upward revision to its inflation forecasts.
Two-Way Risk For USD
Against this backdrop USD has some very clear-two way risk priced in. If incoming inflation data continues to weaken, this should bolster near-term easing expectations, leading USD lower. However, if inflation data remain sticky or rises again, this will dilute near-term easing chances, pushing USD higher. Given that September pricing for a cut is currently around 60%, there is plenty of room for a surprise today to drive a shift in positioning, creating USD volatility.
Forecasts for Today
In terms of the numbers today, the market is looking for monthly core PCE to cool to 0.1% from 0.2% prior. If this forecast is met, market reaction is likely to be muted. However, if we see a surprise on either side, that should drive some bigger flows through USD ahead of the weekend.
Technical Views
DXY
The rally in DXY has seen the market breaking out above the 105.70 level, now trading higher once again within the bull channel. While support at 104.97 holds, the focus is on a further push higher and a test of 107.04 next. Below 104.05 and the channel lows, 104.05 is key support.
.png)
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.