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Softer US CPI Sparks Broad Greenback Selloff

FOREX
  • Another weaker-than-expected US inflation print prompted a significant adjustment lower for the US dollar. The kneejerk reaction was roughly a 1% gap lower for the USD index with the initial surge higher for equities exacerbating the greenback weakness. Despite equities reversing substantially, the DXY has held onto the majority of the session’s fall, registering a 1.10% decline approaching the APAC crossover.
  • With the front-end of the US yield curve shifting around 15 basis points lower, the Japanese Yen was one of the biggest beneficiaries following the data, with USDJPY down around 2.2% at its worst point before recovering a portion of the losses to close around 135.50. On the downside, the bear trigger is unchanged at 133.63. A break would resume the technical downtrend.
  • A very resilient profile across the commodity complex (Bloomberg commodity index +2.00%), is helping the likes of AUD and NZD hold on to gains in the region of 1.5% on the session, while EUR and GBP are modestly underperforming G10 peers.
  • EURUSD has however breached resistance at 1.0595, the Dec 5 high and the bull trigger. The break higher confirms a resumption of the uptrend and also cancels the recent bearish candle pattern - a shooting star. The climb sets the scene for 1.0736 next, a Fibonacci projection. On the downside, key short-term support has now been defined at 1.0443, Dec 7 low, of which a break would signal a short-term top.
  • Focus turns swiftly to tomorrow’s release of UK CPI before the December FOMC meeting and summary of economic projections. A packed calendar continues Thursday, with CB decisions from the Norges Bank, the SNB, the BOE and the ECB.
Energy BulletsCommodities
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