US Dollar turns positive as dust settles on US CPI print

NEW YORK (September 13) The US Dollar (USD) is heading higher after the most recent US Consumer Price Index (CPI) print. The Greenback is looking for direction as traders and analysts are looking for a consensus on how to read the latests numbers. One thing though that is clear is that the recent CPI print does not let the US Federal Reserve cut anytime soon.

As mentioned already earlier, traders  have focused on the core inflation element without food and energy, which has declined from 4.7% to 4.3%. The markets are ignoring the fact that energy turns back into an inflationary force as the overall index is turning higher from 3.2% to 3.7%.

Daily digest: US Dollar jumps

• Ahead of the US inflation numbers, on the other side of the Atlantic Ocean traders have cemented the possibility of one more hike from the ECB for 2023, where just a few days ago hikes were no longer expected.
• The US session will kick off at 11:00 GMT with the Mortgage Bankers Association (MBA) printing its Mortgage Applications for the week of September 8. The Index went from -2.9% to -0.8%.
• The biggest chunk of data came out at 12:30 GMT with the US Consumer Price Index (CPI) for August in all its forms and time frames: Overall Year-over-Year inflation went from 3.2% to 3.7% with month-over-month from 0.2% to 0.6%. THe core inflation, without food and energy, went on a yearly basis from 4.7% to 4.3%. The monthly measure went from 0.2% to 0.3%.
• Back to the normal schedule for Wednesday: around 14:30 GMT the US Energy Information Administration (EIA) will give its latest number for the crude stockpile movements. Expectations are for a smaller drawdown from 6.307 million to 1.912 million barrels less. 
• Expect to see yields being supported again with this time a 30-year bond auction due to be placed in the markets near 17:00 GMT from the US Treasury department. 
• Equities are going nowhere and await US inflation numbers. 
• The CME Group FedWatch Tool shows that markets are pricing in a 93% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. 
• The benchmark 10-year US Treasury bond yield trades at 4.28% and remains elevated even after the step back on Monday. 

US Dollar Index technical analysis: Fed hike in focus

The Greenback heads higher as markest are gearing up for another rate hike from the Fed. It appears that markets first jumped on the weaker yearly core inflation element and sent the US Dollarindex (DXY) lower. As the dust settles, it appears that inflation is actually steady to a bit higher with energy back in inflationary territory, and might see the DXY flip back in the green later in the US session this Wednesday. 

The new high to watch is at 105.16, both the high from last Thursday and the six-month high. The US Dollar Index first needs to gain back its lost territory from this Monday and break above the high of 104.93. Beyond 105.16, the next level to watch is 105.88, the high of 2023.

On Monday, 104.44 kept it together and refrained from allowing the DXY from selling off any further. The high of August 25 did its job and acted as a pivotal level. Should the uptick from this Tuesday reverse and 104.44 gives way, a substantial downturn could take place to 103.04, where the 200-day SMA comes into play for support. 

FXStreet