- The US dollar has rallied slightly during the trading session on Monday as we are testing a crucial region in the form of the ¥150 level.
- The ¥150 level also features the 200 Day EMA, so I would find that as an area of significant resistance.
- What I find interesting here as well is that Tuesday could be a crucial day for the US dollar in general, so all be watching one specific announcement.
Tuesday CPI
During the trading session on Tuesday, we will get the Consumer Price Index coming out the United States which will give us a bit of a look at the inflationary situation in the United States. This is obviously something that the Federal Reserve will be paying close attention to and will have a direct influence on monetary policy. At this point, it seems as if the market believes the Federal Reserve will start cutting rates in September, but it CPI comes out hotter than anticipated, that throws a few questions out there for traders to formulate trading plans on.
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All things being equal, this is also a market that’s worth paying close attention to the technical analysis, as the 200 Day EMA is going to be difficult to break above without some type of catalyst, and I think the CPI number will be the catalyst. Underneath current consolidation, we have the 50 Day EMA hanging around and offering support, so I think a little bit of choppy behavior with a potential shot higher is the route following.
That being said, between now and the CPI release I suspect that the market will be very choppy and noisy, but once we get the CPI numbers, and if they are hotter than the anticipated 0.3% month over month for Core CPI, then the US dollar will probably be a beneficiary of that announcement. If we come in much weaker than anticipated, then we could very well see the US dollar soften, but I still do not want to buy the Japanese yen for a whole plethora of reasons, not the least of which would be the fact that the Japanese have to worry about their own bond market not attracting inflows.
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