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FOREX: Clustered DXY Resistance Could Come into Play on Strong CPI Read

FOREX
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  • EUR/USD spot rates succumbing to the pressure of the uptick in US yields (as we note above, there's been little newsflow and no headline driver for the modest moves), putting spot through yesterday's lows and within range of 1.0517, the 38.2% retracement for the upleg off the cycle low from mid-November, and next major support.
  • Volumes show participation today just below average for this time of day - although at their strongest for the session so far on the latest step lower. This will likely remain the case headed into the US CPI print Wednesday - with today's schedule particularly quiet.
  • EUR overnight vols have today crested just above 14 points - so below the prevailing levels seen pre-NFP last week (through which markets printed an 80 pip range ahead of the Friday cut). With tomorrow's print the last of the year and likely directly influencing next week's rate decision (a 25bps cut is over 80% implied in futures), an outside-of-consensus print will test the sustainability of the USD Index's stabilisation above December lows.
  • While a stronger print may not rule out a December rate cut, the implications for 2025 rate guidance, as well as the latest set of FOMC quarterly projections, will keep key clustered resistance in the USD Index at 106.720-745 in consideration, a break above which brings the post-election highs back into question.
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  • EUR/USD spot rates succumbing to the pressure of the uptick in US yields (as we note above, there's been little newsflow and no headline driver for the modest moves), putting spot through yesterday's lows and within range of 1.0517, the 38.2% retracement for the upleg off the cycle low from mid-November, and next major support.
  • Volumes show participation today just below average for this time of day - although at their strongest for the session so far on the latest step lower. This will likely remain the case headed into the US CPI print Wednesday - with today's schedule particularly quiet.
  • EUR overnight vols have today crested just above 14 points - so below the prevailing levels seen pre-NFP last week (through which markets printed an 80 pip range ahead of the Friday cut). With tomorrow's print the last of the year and likely directly influencing next week's rate decision (a 25bps cut is over 80% implied in futures), an outside-of-consensus print will test the sustainability of the USD Index's stabilisation above December lows.
  • While a stronger print may not rule out a December rate cut, the implications for 2025 rate guidance, as well as the latest set of FOMC quarterly projections, will keep key clustered resistance in the USD Index at 106.720-745 in consideration, a break above which brings the post-election highs back into question.