USD Drops On US CPI Rates Release

Apr 14 21, 10:34 GMT

The financial markets showed their anticipation for the US CPI rates for March released on Tuesday, as a reaction was observed throughout the board. The monthly US CPI rate increased to 0.6% surpassing both previous and forecasted rates, while the yearly figure also followed with a rise to 2.6% with similar circumstances. The USD weakened for the second consecutive day on Tuesday with the Dollar Index reaching a new monthly low during the US session. All major US stock markets reached to new all-time high levels supported by the greenback’s weakening. Gold also participated in the action gaining approximately $20 on Tuesday supported by US bond yields moving lower on the day.

Very importantly on Tuesday, the U.S. CDC and FDA recommended a pause of the use of the Johnson & Johnson COVID-19 Vaccine. Even though 6.8 million doses have already been provided, a severe type of blood clot has been identified in some cases and seems to be worrying the health industry prompting a new investigation.

XAU/USD moved higher and tested our (R1) 1745 resistance level on Wednesday’s US session. The (R1) is a rather sturdy level that has been tested various times in March and April but had only been breached to the upside twice. Yet if the (R1) is breached upwards, the (R2) 1760 level may become the most possible target for the bulls, as was the case on the 8th of April when Gold reached a monthly high. Our (R3) 1775 resistance level is in our opinion the stop even higher and could come into play with extensive buying power. If Gold’s price action is to return lower then the (S1) 1720 support level could be a possible first stop. Lower than that, the (S2) 1705 barrier can be the next choice for the sellers while at the end, the (S3) 1690 hurdle represents the lowest support line. Please note after the recent price increase the RSI indicator below Gold’s chart has made a steep jump, also reflecting the bullish interest.

EUR higher on optimistic data

The EUR’s strength was also very notable on Tuesday as EUR/USD reached a new monthly high level and EUR/GBP reached a new two month high level. According to various sources the EUR has been supported by increased vaccinations carried out in the countries with the biggest economies in the Eurozone. (Germany, France, Italy) The vaccination process has been a great thorn for the Eurozone which has been heavily criticized for its slow movement on the subject. Yet the tables may have turned at the moment, as traders seem to favour the EUR with recent price action. Finally, according to the Financial Times Eurozone’s economy is better adapting to coronavirus lockdowns. In the report it is said that consumers have increased their presence in retail and entertainment locations since the start of the year across most Eurozone economies.

EUR/USD performed a steep rise and reached our current (R1) 1.1964 resistance level which has not been seen since the 18th of March. If the market continues to be dominated by buying interest then the next level higher could be the (R2) 1.1985 hurdle which was tested twice in March but was not breached. Our highest level for this report is the (R3) 1.2005 resistance barrier. In the opposite direction, a selling trend could force traders to turn their attention to the (S1) 1.1940 support level, for a start. Lower than that the (S2) 1.1920 support line is also imminent and worked as a considerable resistance level in the first days of April. Even lower we placed the (S3) 1.1885 hurdle which has also been tested various time in April but not breached proving it is solid.

Other economic highlights today and early Tuesday:

Today during the European session, we get from Sweden the Inflation data for March as well as the Eurozone Industrial Production figure for February. In the European afternoon we also get speeches from ECB President Christine Lagarde and US Federal Reserve Chair Jerome Powell. In the American session we get from the US the EIA weekly Crude Oil stocks figure. During Thursday’s Asian session, we get Australia’s employment report for March.

XAU/USD H4 Chart