US Dollar (DXY) Price and Chart Analysis
- US Inflation is expected to nudge lower in November.
- The US dollar is stuck in a short-term range and waiting for a driver.
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The latest US inflation report (November) will be released today at 13:30 GMT. The annual core inflation rate is seen dropping to 6.1% from 6.3% in October, while the headline rate is seen easing to 7.3% from 7.7% in the previous month. Any easing of US price pressures will be welcomed by the Federal Reserve which announces its latest monetary policy decision on Wednesday at 19:00 GMT. Markets are currently pricing in a 50 basis point rate hike tomorrow.
One report that was released yesterday, The New York Fed Survey of Consumer Expectations, showed median one-year interest rate expectations falling sharply from 5.9% to 5.2%, while three- and five-year expectations slipped 0.1% lower to 3% and 2.3% respectively. A read across to today’s CPI report may see the rate of inflation slowing by more than currently expected.
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Short-dated US Treasury yields are also biding their time with the two-year UST currently trading at 4.38%, the neckline level of the recent head and shoulders pattern. If the two-year breaks below the 4.26% to 4.18% area, then 4.08% to 4.00% becomes the next landing zone.
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The US dollar has barely moved this week and sits in the middle of a medium-term support zone. The greenback continues to trade below all three moving averages – a bearish outlook – while the 14-day Average True Range (ATR) – a measure of volatility – is currently resting at a multi-week low. If today’s CPI print deviates from expectations, or if chair Powell gives a clear hint on future US monetary policy at tomorrow’s FOMC press conference, then expect the US dollar to break out of its recent torpor, and quickly.