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US Dollar Solid Ahead of CPI and Fed Chair Powell Confirmation. Will USD Run Higher?


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US DOLLAR, DXY INDEX, US CPI, FEDERAL RESERVE, POWELL - TALKING POINTS

  • The US Dollar remains underpinned by a hawkish Federal Reserve
  • US CPI could provide clues on policy tightening from the Fed
  • Fed Chair Powell is likely to deliver on expectation. Where to for USD?

Turkey: Treasury posts $3.7B cash deficit in January

The US Dollar was steady ahead of CPI numbers and Federal Reserve Chair Jerome Powell’s confirmation hearing before the Senate Banking Committee. He has widespread support on both sides of the aisle.

Pre-prepared remarks have already been released and they did not hold any surprises with the focus on fighting inflation now that the economy is healthy enough.

However, there could be some volatility emerge from the question-and-answer session if there are comments that are unexpected.

The US session saw an amazing recovery late in the day for the Nasdaq. It’s being reported that retail investors bought USD 1 billion worth of stock after a JP Morgan analyst put out a recommendation to buy the dip.

Meanwhile, Treasuries continue to hold onto their lofty yields near 1.76% amid heightening anticipation for the Fed to tighten aggressively at their March meeting.

The Australian Dollar was firmer today after retail sales printed at 7.3% for the month of November against expectations of 3.6%. Trade data was a small miss at AUD 9.4 billion against AUD 10.6 billion expected.

Japan returned from a long weekend and played catch-up, with the Nikkei 225 index heading lower (-1%), while Japanese Government bond (JGB) yields moved higher with the 10-year trading near 0.145%.

Gold went higher again today, and industrial metals also had a good day with iron ore and aluminium up on the day.

ECB President Christine Lagarde will be giving an address today, but the main focus for the market will be the US CPI number.

US DOLLAR INDEX (DXY) TECHNICAL ANALYSIS

Despite moving sideways and trapped in a 95.518 – 96.938 range since mid-November, the US Dollar index remains in an ascending trend channel.

It is above the 55 and 100-day simple moving averages (SMA), which could suggest that underlying medium and long-term bullish momentum persists.

Resistance might be at the recent highs of 96.462, 96.906 and 96.938.

On the downside, potential support may lie at the previous lows and pivot points of 95.57, 95.518, 94.561, 93.875, 93.278 and 91.947.

USD CHART

Chart created in TradingView

 

Written by Daniel McCarthy, Strategist for DailyFX.com. 11th Jan 2022.

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Dollar stuck as traders wait on Fed's Powell for new policy clues

Reuters.pngEconomyJan 11, 2022 
 
 
 
Dollar stuck as traders wait on Fed's Powell for new policy clues© Reuters. FILE PHOTO: A U.S. Dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration

By Kevin Buckland

TOKYO (Reuters) - The U.S. dollar hovered near the middle of its recent range against major peers on Tuesday as traders looked to incumbent Fed Chair Jerome Powell's nomination hearing later in the day for new clues on the timing and pace of policy normalisation.

In his prepared opening remarks, released Monday, Powell will pledge to prevent high inflation from becoming "entrenched," but will make no mention of plans for the path of monetary policy.

However, he will take questions from senators in his bid for a second four-year term.

The dollar index, which measures the currency against six counterparts, hovered around 95.86 late in the Asian session.

It hit a more than 16-month high of 96.938 on Nov. 24 amid increasing hawkishness from Fed policy makers, but has since been stuck between that level and 95.544, despite a continued ramping up of rhetoric that now has Wall Street banks forecasting four quarter-point rate hikes this year.

TD Securities strategists said it seemed the Fed was of the mindset of "sooner rather than later" for both higher rates and running off its balance sheet after ending bond-buying stimulus - a process dubbed quantitative tightening (QT).

"An affirmation of March tightening and early QT should support USD firmness overall, though within well-established ranges," they wrote in a research note.

TD expects a first rate hike in June, but said as early as March was also a possibility.

Money markets are priced for an increase by May, with two more by November.

U.S. December consumer inflation data is due to be released on Wednesday, with headline CPI seen coming in at a red-hot 7% on a year-on-year basis, boosting the case for an early increase in interest rates.

Ten-year U.S. Treasury yields rose to an almost two-year high above 1.8% overnight, but provided only muted support for the greenback.

The dollar was little changed at 115.26 yen after bouncing off a one-week low of 115.045 on Monday.

The euro was about flat at $1.1341, stuck in the middle of its trading range since mid-November.

"The failure of the USD to rally despite a growing relative premium of U.S. bond yields over other G10 economies has many talking about what will need to play out to drive the USD higher," Chris Weston, head of research at brokerage Pepperstone, wrote in a client note.

The direction for euro-dollar will be set by a closing break on either side of its recent $1.1380 to $1.1270 trading channel, he said.

 

Sterling was stable at $1.3594 after easing back from Monday's two-month high of $1.36025.

The Australian dollar added 0.19% to $0.7188, getting support from local retail sales data that came in much higher than economists forecast.

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