US Dollar Sinks as Markets Reverse Ahead of ECB and US CPI. Where to for DXY Index?

[MongiIG]

US DOLLAR, CRUDE OIL,EUR, NOK, SEK, USD, JPY, CHF, ECB, US CPI - TALKING POINTS

• The US Dollar eased today as markets liked what they heard about Ukraine
• Equities move higher, commodities went lower, and currencies were mixed
• All eyes on ECB and US CPI today. Will USD (DXY index) resume its uptrend?

 

The US Dollar pulled back over 1% from its recent peak as the markets sighed a breath of relief on the announcement over night that Ukraine may consider a “diplomatic solution”.

This solution would involve a commitment by Ukraine to neutrality but maintenance of all its territory.

At the end of the North American session, the commodity price board was all red while the equity board was all green in a reversal of recent fortunes.

Currencies that had been rallying sold off, and vice versa. EUR, NOK and SEK were the big gainers, while USD, JPY and CHF lost ground.

The Nasdaq was up 3.6% in its cash session and APAC equities have also gone north. A lower oil price boosted Japan’s Nikkei 225 by more than 4% at one stage today. The island nation is a major energy importer.

The WTI and Brent crude oil futures contacts are a long way from their recent highs with WTI near US$ 111 bbl from US$ 130.50 bbl, and Brent at around US$ 114 bbl from US$ 139.15 bbl.

Nickel remains closed on the London Metal Exchange (LME) and all other commodities – energy, metals and agriculture – were notably lower. At the time of going to print, gold is near US$ 1,980 an ounce, down from US$ 2,070 seen on Tuesday.

G-10 government bond yields ticked up, with the benchmark 10-year Treasury note now yielding 1.94%, up around 27 basis points from the low on Monday.

The European Central Bank (ECB) will be meeting today, and they are expected to leave rates unchanged. The focus will be on the commentary from ECB President Christine Lagarde when she gives a press conference immediately after the pow wow.

The US Dollar softened ahead of US CPI later today where the market is anticipating year-on-year headline CPI to be 7.4% and core CPI to print 6.4%, both 0.4% above last months’ figures.

The US will also get some jobless claims data at the same time as CPI.

The full economic calendar can be viewed here.

 

US DOLLAR (DXY INDEX) TECHNICAL ANALYSIS

After making a peak at the start of the week, the US Dollar index (DXY) pulled back to support levels but was unable to penetrate below them.

The10-day simple moving average (SMA) and the pivot point of 97.802 may continue to provide support. Below that, 97.441 and 96.462 might also provide support.

On the topside, the recent high of 99.418 could offer support ahead of the highs seen in early 2020 at 100.556 and 100.931.

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com. 10th March 2022