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Key Inflation Data May Add Strength to a Recovering US Dollar

Sep 14 2017, 12:31 AM (CDT) |


Forex News: Most of yesterday’s trading session was slow but in the afternoon the US Dollar found new supporters and a heavy wave of bears stepped into the market, taking the pair close to 1.1900. Most of the move was generated by an announcement that a U.S. tax plan may be released on the 25th of September.

Key Inflation Data May Add Strength to a Recovering US Dollar 1

Technical Outlook

The pair has broken the important confluence zone created by 1.1960, the 50 period Exponential Moving Average and the bullish trend line. This is a major victory for the bears and suggests that more downside action will follow, with 1.1875 as target. In the meantime, 1.1900 remains a strong barrier that may trigger bounces to the upside; also keep in mind that U.S. inflation data released today will play an important role for price direction. 

Fundamental Outlook

The U.S. Consumer Price Index will be today’s highlight, showing changes in the price that consumers pay for the goods and services they purchase. This is considered the main gauge of inflation and has a high impact on the US Dollar, with higher numbers strengthening it. The expected change is 0.3% and the time of release is 12:30 pm GMT. At the same time the Core version of the CPI (excludes food and energy from calculation) comes out and is expected to show a change of 0.2%.



After reaching a high at 1.3330 the pair dropped sharply and moved below 1.3250 on the back of newfound US Dollar strength. The British economic data released yesterday did not have a huge impact on price action.

Key Inflation Data May Add Strength to a Recovering US Dollar 2

Technical Outlook

Price was signalling for a relatively long while that a move lower was in the making and now the pair is facing heavy selling pressure which makes us anticipate a move below 1.3220 and close to 1.3160. If price dips that low, the 50 EMA will climb and will create a confluence zone together with the mentioned support, thus increasing the probability of a bounce higher from there. Until a lower high or a lower low is created, the uptrend is still in place.

Fundamental Outlook

The Bank of England will announce the interest rate today at 11:00 am GMT and will release a Monetary Policy Summary at the same time, which contains details of the economic reasons that determined the rate vote. Although no rate change is expected (currently 0.25%), the event is likely to cause volatility increase, especially if the Monetary Policy Summary offers hints about a near-future rate hike.

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