USDInd primed for data heavy week :: InvestMacro

• Data packed week could rock USD

• Watch out for US CPI report

• USDInd bearish on D1 but RSI oversold

• Key level of interest at 102.80

Even as markets brace for potential volatility ahead of the US jobs report this afternoon (Friday 8th March), investors are mindful of the string of key data releases in the week ahead.

Top-tier economic reports from across the globe and political developments in the United States will be in focus. However, watch out for the US CPI report which could be the main market mover:

Saturday, 9th March

• CNH: China aggregate financing, PPI, CPI, new yuan loans

Sunday, 10th March

• Daylight Savings Time in the US begins
• Ramadan holiday starts at sundown for Muslims worldwide

Monday, 11th March  

• JPY: Japan GDP
• US budget proposal from President Joe Biden

Tuesday, 12th March

• AUD: Australia business confidence
• EUR: Germany CPI
• JPY: Japan PPI
• GBP: UK jobless claims, unemployment
• USD: US February CPI report

Wednesday, 13th March

• EUR: Eurozone industrial production
• NZD: New Zealand food prices
• GBP: UK industrial production
• GER40: Volkswagen, Adidas earnings

Thursday, 14th March

• USD: US PPI, retail sales, initial jobless claims

Friday, 15th March

• NZD: New Zealand PMI
• USD: US industrial production, University of Michigan consumer sentiment

The scheduled data releases could present fresh trading opportunities across financial markets.

But our attention falls on the USDInd which tumbled this week following dovish comments by Fed Chair Jerome Powell.

The USD Index tracks how the dollar is performing against a basket of six different G10 currencies, including the Euro, British Pound, Japanese Yen, and Canadian dollar.

The USDInd could be set for more action and here are 3 reasons why:

1. US February CPI report

The February US Consumer Price Index (CPI) report published on Tuesday may influence bets around when the Fed will start cutting rates.

Markets are forecasting: 

• CPI year-on-year (February 2024 vs. February 2023) to remain unchanged at 3.1%.
• Core CPI year-on-year to cool 3.7% from 3.9% in the prior month.
• CPI month-on-month (February 2024 vs January 2024) to rise 0.4% from 0.3%.
• Core CPI month-on-month to cool 0.3% from 0.4% in the prior month.

Although headline inflation is expected to remain unchanged at 3.1%, the annual core is expected to have cooled to 3.7% – its lowest level since April 2021. Ultimately, further evidence of disinflation may fuel expectations around the Fed cutting interest rates.

• A softer-than-expected US CPI report may send the USDInd lower.

• Should inflation remain sticky, the USDInd has the potential to push higher.

 

2. Key US data

Looking beyond the US CPI report, it would be wise to keep a close eye on other important data points including PPI, retail sales and industrial production among other  releases. These reports may provide fresh insight into the health of the US economy and additional clues on the Fed’s next move.

Traders are currently pricing in a 28% probability of a 25 basis point cut in May with this jumping to 96% by June 2024.

Note: These odds are likely to not only be influenced by the US jobs report, but incoming US inflation data along with other key releases next week.

• Should overall US economic data support the case for lower US interest rates, this may drag the USDInd lower.

• However, if overall data exceeds forecasts and supports the argument around US rates remaining higher for longer, this could boost the USDInd.

 

3. Technical forces

The USDInd is under pressure on the daily charts with prices trading below the 50, 100 and 200-day SMA. Although bears seem to be gaining momentum, the Relative Strength Index (RSI) signals that prices are heavily oversold.

• A solid daily close below the 102.80 level may trigger a decline towards 102.00 and 101.35.  

• Should prices push back above the 50-day SMA, this may encourage a move towards the 200-day SMA at 103.75 and 104.30.