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US CPI Sparks Dollar Volatility, Weak Equities Prompt NZD & AUD Slump

FOREX
  • The huge beat in US CPI, rising 0.8% m/m, prompted immediate strength in the greenback as US 10-year yields soared back above 1.65%.
  • Despite the initial bout of strength for the Dollar Index, in the region of 0.4%, a full retracement and sharp selling pressure actually led the DXY to make new lows on the session, with EURUSD firming from 1.2072 to fresh highs at 1.2152.
  • As the dust settled following the data, the greenback gradually inched back higher throughout the session, to eventually make new highs once again, supported by continued pressure on global equity indices and higher US yields.
  • The poor risk sentiment caused an extension of weakness for Aussie and Kiwi, currencies that were firmly in the red following the overnight Asia session. Additional dollar strength throughout US hours prompted losses in the region of 1.5% for AUDUSD and NZDUSD Wednesday.
  • CAD remains the clear outlier and outperformer. Roughly unchanged on the day in the face of equity weakness and a surging greenback indicates the strong trend in play following the recent testing of multi-year highs. USDCAD briefly dipped below a major support level to new lows of 1.2046, representing the lowest level for the pair since 2015. The 1.2062 pivot support level will potentially either reinforce the current medium-term bear leg if breached or lead to a reversal if the support manages to contain CAD strength.
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