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Dollar Index In the Crosshairs Ahead of US CPI Data

Dollar Index In the Crosshairs Ahead of US CPI Data, FP Markets

Ahead of today’s US CPI release, the US Dollar Index is hovering just north of major support coming in at 104.78, and is seen testing the grip of channel support, extended from the low of 105.21. These are important barriers to monitor.

Inflation Expected to Slow

A broad miss in the data today will likely weigh on the US dollar (USD), potentially pushing the Dollar Index through current support toward another, more local, support level at 104.48. You may recall that the Fed is not pursuing policy firming at the moment, and it would take a sizeable upside deviation in the data to begin to alter that view.

With economists expecting the year-on-year CPI measures to slow, with headline expected to cool to 3.4% in April from 3.5% (March) and core to slow to 3.6% from 3.8% over the same period, sellers will likely be looking for +3.3% (headline) and +3.5% (core) to get them excited which should see a strong downside move in the USD.

Upside Surprise?

Of course, a surprise to the upside is still not off the table. However, it would need a more sizeable beat to interest market participants. Traders will likely need a +3.6% beat in the headline number and a +3.8% number in the core measure to see the buck underpinned. A release such as this could have sufficient fuel behind it to drive price action towards channel resistance, taken from the high of 105.74.

Dollar Index In the Crosshairs Ahead of US CPI Data, FP MarketsDISCLAIMER:

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