USD Remains Stable Ahead Of Today’s Inflation Releases

Jun 25 21, 10:56 GMT

The USD seemed to remain steady yesterday against a number of its counterparts, while US stockmarkets tended to rise ,with Nasdaq and S&P 500 closing at record highs and gold’s prices didn’t show much fluctuation. It should be noted that the bipartisan support for the new US infrastructure plan of $579 billion, tended to provide some support for the USD stockmarkets as it would include investments in the power grid, broadband internet services and passenger and freight rail. On the monetary front, Fed policymakers seem split about the bank’s priorities, given that some tend to highlight the risk of inflationary pressures, while others including NY Fed President Williams note that a high number of jobs has still to be revived. Today we expect trader’s attention to turn the US financial releases especially the US inflation measures for May, which could move the markets.

The USD Index remained stable yesterday just above the 91.75 (S1) support line. As the index’s price action seems to have broken the downward trendline characterising its movement we tend to switch our bearish outlook in favour of a sideways bias for now, yet the bears may persist. It should be noted that the RSI indicator is at the reading of 50 which may imply a rather indecisive market, yet we also note a slight downward slope, implying the presence of the bears. Should the bears be actually in charge, we may see it breaking the 91.75 (S1) support line and aim for the 91.30 (S2) level. On the other hand, should the bulls regain control, we may see the dollar index aiming if not breaching the 92.30 (R1) resistance line.

GBP suffers some modest losses on BoE’s interest rate decision

Sterling weakened against the USD, EUR, JPY and CHF yesterday as BoE kept its bond buying program as well as its interest rate unchanged yesterday with the latter being widely expected. The BoE’s Monetary Policy Committee (MPC) voted 8-1 to keep its government bond-buying program at 875 billion pounds as well as its 20 billion pound corporate bond purchasing program to remain intact, while also voted 9-0 to keep the Bank Rate unchanged at 0.1%. The bank stated that inflation could surpass 3% as UK’s locked-down economy reopens, yet the acceleration is expected to be temporary by the bank, thus BoE’s policymakers favoured to keep the stimulus in place unchanged. There seems to be no intention in the bank to tighten its monetary policy for the time being and that tended to weaken the pound, while today we expect fundamentals to maintain the lead over the pound’s direction.

GBP/USD dropped a bit yet remained comfortably between the 1.3990 (R1) and the 1.3845 (S1) levels. We tend to maintain a bias for a sideways motion for cable given its stabilisation in today’s Asian session. Please note that the RSI indicator below our 4-hour chart is running just below the reading of 50 and may also be implying that the market hasn’t made up its mind on the direction of the pair’s next leg. Should a selling interest be displayed by the market, we may see the pair breaking the 1.3845 (S1) support line and aim for the 1.3670 (S2) support level. Should buyers be in control of cable’s direction we may see it breaking the 1.3990 (R1) resistance line and aim for the 1.4145 (R2) level.

Other economic highlights today and the following Asian session:

Today during the European session we get Germany’s GfK Consumer Sentiment for July. In the American session we note the release of the US consumption rate for May and the Core PCE Price index for the same month as well as the final University of Michigan consumer sentiment for June. Please note that Cleveland Fed President Mester, Boston Fed president Rosengren and New York Fed President Williams are scheduled to speak, ECB President Lagarde participates in the Euro Summit and on Monday BoJ is to release the summary of opinions for June’s meeting.

USD Index H4 Chart