DOLLAR FUNDAMENTAL BACKDROP
US CPI (refer to economic calendar below) was released largely in line with expectations with the headline print marginally lower at 4.9%. No real surprises here and from a Fed perspective, a welcomed release. A CPI beat may have ‘hawkishly’ repriced Fed rate hike expectations after the strong US jobs report last week. Higher gasoline prices contributed to an elevated read leaving the inflation figure distanced from the target rate of 2%.
US ECONOMIC CALENDAR
Implied Fed funds futures pricing for year end have increased almost 8bps post-announcement now anticipating 71bps of cumulative rate cuts. The immediate reaction by the USD as shown via the Dollar Index (DXY) saw bears jump back in and drive prices lower.
FEDERAL RESERVE INTEREST RATE PROBABILITIES
MARKET REACTION – TECHNICAL ANALYSIS
U.S. 10-YEAR TREASURY YIELD DAILY CHART
The U.S. 10-year Treasury yield consequently fell below the 3.5% mark in conjunction with the death cross (red) signal that may suggest yields are heading towards the 3.253% swing low.
U.S. DOLLAR INDEX DAILY CHART
Chart prepared by Warren Venketas, IG
The daily DXY chart has pierced the 101.42 swing low heading towards symmetrical triangle support. A break below coinciding with the 101.00 psychological handle could subsequently expose the 100.00 level and beyond.
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