US dollar support breakout remains lackluster after Powell speech, focus on CPI
US dollar flat as Jerome Powell offers no new meaningful updates; the DXY Dollar Index support breakout has been lackluster so far and Australian dollar now eyeing local monthly inflation gauge next.
Asia-Pacific Market Briefing – Powell Underwhelms, Focus on CPI
The US dollar marked time in what was a fairly quiet trading session on Wednesday. Traders were eagerly anticipating a speech delivered by Federal Reserve Chair Jerome Powell during the Wall Street trading session. But, when the time came, he did not directly comment on the monetary policy or economic outlook. This left markets focusing on more pressing matters ahead, namely the CPI report.
Since the turn of the new year, a couple of disappointing economic figures left markets repricing the broader Fed rate outlook. Looking at the chart below, two more rate cuts were added by the end of next year. That has resulted in broad weakness in the US dollar and some optimism in equity markets, albeit very cautiously.
Moreover, markets are increasingly looking to a softer-than-expected US inflation report on Thursday. The headline rate is seen clocking in at 6.5% y/y in December, which would be down from 7.1% in November. Consequently, this does mean that a stronger outcome, or even an in-line reading perhaps, may result in disappointment due to rising expectations of a weakening.
Markets have added two Fed cuts by end of 2024 since January started
Friday’s Asia-Pacific trading session – Australian CPI, AUD/USD
Cautious optimism on Wall Street may see Asia-Pacific indices push higher. Although, meaningful progress may have to wait until after the US CPI data. In the interim, the Australian dollar will be eyeing local inflation data. Australian CPI is seen clocking in at 7.2% y/y in November versus October’s 6.9%. This may keep the Reserve Bank of Australia on its toes, offering AUD/USD some upside.
US dollar technical analysis
On the daily chart, the DXY US dollar Index left a Doji candlestick pattern after prices broke under the key 103.39 – 103.93 support zone. This is a sign of indecision. Meanwhile, positive RSI divergence shows that downside momentum is fading. That is a hint that prices could turn higher.
As such, it seems premature to confirm USD’s downtrend resumption at this time. Further downside progress places the focus on the May 2022 low at 101.29.
DXY daily chart
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.