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Asset Watch
Wednesday, July 12, 2023
• Will markets price in more rate hikes?
• DXY price develops a bearish continuation pattern
The US dollar price retreated for the fifth day in a row and printed its lowest levels in two months at 101.34 as markets expect the US headline CPI to drop from 4% in May to 3.1% in June while the core CPI to fall from 5.3% to 5%.
It is noteworthy to mention that investors have already priced a rate hike of 25 basis points in the upcoming Fed meeting in July. Therefore, the June CPI with July and August data will affect the Fed monetary policy in the September meeting i.e. markets could start pricing in another 25 basis points if inflation proves stickier ( this scenario is positive for the US dollar price and negative for commodities’ prices such as the gold) while any lower than expected inflation data in the coming months specially the core CPI could lead the market to stop pricing in any rate hike ( this scenario positive for the gold price and negative for the US dollar)
Chart source: TradingView
On Jun 7 the US dollar price index closed below the 50-day simple moving average and generated a bearish signal. Currently, the price moves in the trading zone located between 102.91 – 101.16 therefore, a daily close below the low end of that zone could encourage traders to press towards 97.81. However, the level located at the lower line of the descending tringle at 100.84 and the support level at 99.79 should be watched closely.
It’s important to note that if the price breaks and remains below the lower line of the mentioned triangle this could send the price even lower towards the 95.77 level. On the other hand, any failure in closing below the low end of the mentioned trading zone at 101.16 signals a continuation of the current sideways move and possibly sends the price towards the high end of the trading zone at 102.91.
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