US Dollar Weakens in Advance of US CPI, Investors Scanning for DXY Course
US Dollar Drifts Lower Ahead of Key Economic Data Release
Market Overview – US Dollar Weakens
The US dollar weakens and is experiencing a slight dip in value as investors await the release of crucial US CPI data. This information will help investors decide how to adjust their investments. The Bloomberg survey of economists predicts a year-on-year read of 5.0% to the end of April.
The US debt ceiling and issues surrounding US regional banks are also causing concern among investors. Wall Street finished its cash session lower, and all major APAC equity indices are in the red. However, Japan’s TOPIX index remains near 33-year highs.
Yesterday, New York Fed President John Williams reiterated the Federal Reserve’s view that future decisions for the Federal Open Market Committee (FOMC) will be data-dependent.
Treasuries have barely moved today, while gold is slightly higher and crude oil has softened slightly. The WTI futures contract is approaching US$ 73 bbl while the Brent contract is a touch below US$ 77 bbl.
China’s Crackdown on Foreign Companies
China has continued to expand its crackdown on foreign companies that it believes have been involved in espionage activities. The Middle Kingdom’s diplomatic stoush with Canada saw a Canadian diplomat expelled from Shanghai. USD/CAD is steady just under 1.3400.
Key Economic Data Release
While German CPI and Italian industrial production might hold some attention, US CPI will be the key economic data release today.
Technical Analysis – US Dollar Weakens
The US Dollar volatility has been sliding lower as illustrated by the narrowing of the 21-day simple moving average (SMA) based Bollinger Bands. The sideways price action has set up a range trading environment, and a clean breakout on either side may see momentum unfold in that direction.
It is important to keep in mind that current market conditions have seen several false breaks. That is when the price makes a new high or low outside the existing range trading band but fails to make a close outside it.
Support could be at the prior lows of 101.03, 101.01, 100.82, and 100.79. On the topside, resistance might be offered at previous peaks of 102.40, 102.81, and 103.06.