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USD looks to gain despite CPI meeting forecasts

2:53 PM January 11, 2019

Summary:

  • USD catching a bid at the start of the US session

  • December CPI Y/Y: +1.9% as expected

  • USDCAD bounces strongly from weekly low below 1.32

 

The greenback is attempting to stage a comeback this afternoon after a fairly soft week for the US dollar, which has seen the currency fall against most of its peers. There is no obviously apparent catalyst for the move, although reports of some Turkish troop movements on the Syrian border are being attributed by some analysts as contributing to the appreciation. Looking around the other asset classes this doesn’t seem to be a flight to safety move though with Gold falling back lower and the USDJPY recently moving up to its highest level of the day. The timing of the move does coincide with the beginning of the US session and it is readily apparent that US traders ahve clearly entered buying. 

The US dollar has seen a flurry of buying at the start of the US session which has driven the trade-weighted index firmly higher. Source: xStation

 

Before the US entered we got the latest inflation figures, with the CPI for December coming in at +1.9% as expected. This marked a drop on the 2.2% Y/Y seen previously, and is in fact the lowest since July 2017. A large part of this drop can be explained by the recent plunge in oil prices and if we strip out energy (and food) to arrive at a core reading, the print is higher at 2.2% Y/Y.

Headline inflation pulled back according to the latest CPI release with the drop in Oil prices likely playing a role. The core reading remained unchanged at 2.2%.   

 

Looking around the USD pairs the USDCAD stands out as of particular interest, given that the market has fallen to its lowest level in over a month in the past week. The market has rallied strongly by almost 100 pips in the past hour and is now looking to form a large bullish engulfing candle on H4. The Fib region from 38.2%-41.4% at 1.3325-1.3296 is an area of potential resistance and could be worth watching closely if the price continues to gain.

USDCAD has experienced a sharp bounce and the pair is now moving back towards the 41.4% fib at 1.3296. Source: xStation   

 

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