USDInd set for volatile week? :: InvestMacro

• USDInd ↑ almost 4% year-to-date

• Key US CPI report under spotlight

• Watch out for Fed speeches
  

• Trading within range on D1 charts

• Levels of interest – 106.50, 105.60 & 105.00

The week ahead is jampacked with top-tier data and speeches by numerous policymakers.

But the spotlight shines on the incoming US inflation data which may rock FXTM’s USDInd:

Saturday, 11th May

Monday, 13th May

• AU200: Australia business confidence
• NZD: New Zealand food prices, inflation expectations
• USDInd: Fed speech
• CHF: SNB President Thomas Jordan speech

Tuesday, 14th May

• JP225: Japan PPI
• GER40: Germany CPI, ZEW survey expectations
• UK100: UK jobless claims, unemployment, BoE Economist Huw Pill speech
• USDInd: US PPI, Fed Chair Jerome Powell speech

Wednesday, 15th May

• CAD: Canada housing starts, existing home sales
• CN50: China rate decision
• EU50: Eurozone industrial production, GDP
• USDInd: US CPI, retail sales, empire manufacturing, Fed speech

Thursday, 16th May

• AU200: Australia unemployment
• JP225: Japan GDP, industrial production
• EUR: ECB publishes financial stability review
• USDInd: Initial jobless claims, industrial production, Fed speech

Friday, 17th May

• CN50: China property prices, retail sales, industrial production
• HK50: Hong Kong GDP
• EU50: Eurozone CPI
• SG20: Singapore trade

The USDInd has been trapped within a range since mid-April with major resistance at 106.50 and support around 105.00.

Note: FXTM’s USDInd tracks how the dollar is performing against a basket of six different G10 currencies, including the Euro, British Pound, Japanese Yen, and Canadian dollar.

Digger deeper, the dollar has appreciated against every single G10 currency year-to-date.

Dollar bulls have been supported by cooling Fed cut bets in the face of sticky inflation and strong data.

With all the above said, here are 3 reasons why the USDInd could see significant moves:

    1) US April CPI report

The April Consumer Price Index (CPI) published on Wednesday may influence expectations around what the Fed does in the second half of 2024.  

Markets are forecasting:

• CPI year-on-year (April 2023 vs. April 2024) to cool 3.4% from 3.5% in the prior month.
• Core CPI year-on-year to cool to 3.6% to 3.8%.
• CPI month-on-month (April 2024 vs March 2024) to remain unchanged at 0.4%.
• Core CPI month-on-month to cool to 0.3% to 0.4%.

Headline inflation and the annual core inflation figures are expected to have ticked lower in April. But this is still some distance away from the Fed’s 2% target.

Nevertheless, further evidence of cooling prices may stimulate expectations around the Fed cutting interest rates in the second half of the year.

Traders are currently pricing in a 36% probability of a 25-basis point Fed cut by July with this jumping to 90% by September.

• A softer-than-expected US CPI report could send the USDInd lower as Fed cut bets jump.

• Should the inflation report print above market forecasts, this could boost the USDInd.

 

    2) Fed speeches + US data

A string of speeches from numerous Fed officials including Jerome Powell could pump the USDInd with fresh volatility. Given the recent mixed signals from US policymakers on the path of rates, the incoming speeches may provide investors with fresh clarity on what to expect from the Fed.

Much attention will also be directed towards the latest US retail sales, Producer Prices Index (PPI), and initial jobless claims to gauge the health of the US economy.

• The USDInd could push higher if Fed officials strike a hawkish note and overall data supports the “higher for longer” narrative for rates.

• If economic data disappoints and Fed officials sound more dovish, the USDInd may trade lower.

 

    3) Technical forces 

The USDInd is trading within a range on the daily charts with prices hovering near the 105.00 level. Still, the candlesticks are trading above the 50, 100, and 200-day SMA while the MACD trades above zero.

• A solid breakdown and daily close below 105.00 could encourage a decline toward the 50-day SMA and 200-day SMA.

• Should 105.00 prove to be reliable support, this could trigger a rebound to 105.60 and 106.50.