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Greenback Spikes On Higher US CPI Prints, Extending Gains

FOREX
  • The US Dollar gapped higher on Tuesday following the release of US CPI, swiftly paring prior losses and then surging to post significant gains on the session. Despite previously extending the pullback from cycle highs to 2.7%, the USD Index has risen an impressive 1.85% from intra-day lows, as even more aggressive bets are made on next week’s FOMC action.
  • Greenback gains have been broad based, however, the steep declines across major equity indices (e-mini S&P 500 futures down 3.5%) has placed significant pressure on the likes of AUD and NZD, which have both fallen around 2.25%. NZDUSD, in particular, has now fallen back below 0.60 and is at the lowest levels since May 2020.
  • Similarly, significant moves for the Euro and GBP which have plummeted 1.5% as EURUSD falls back below parity and cable hovers just above 1.15 ahead of the APAC crossover.
  • EURUSD is trading back inside the medium-term channel that the pair appears to have made a false break above on Monday. Price action has breached initial support at 1.0037, the 20-day EMA and continues to grind consistently lower. Focus on the downside turns to 0.9931, low Sep 8 and then the bear trigger at 0.9864.
  • In similar vein, USDJPY surged quickly from 142 to 144 following the data and has since consolidated gains above the 144 handle. Last week’s climb reinforces the primary uptrend and attention is on the cycle high at 144.99 where a break would also strengthen current bullish conditions.
  • UK Inflation data is the focus for the European trading session on Wednesday before the rescheduled Bank of England decision on Sep 22. US PPI data headlines the US docket.
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