Dollar Poised For Next Leg Higher
Dollar Breakout Continues
The US Dollar is on track to end the week firmly higher as bullish sentiment develops further on the back of a recent string of tier-one data strength and hawkish Fed commentary. Last Friday’s bumper NFP release saw market pricing for a December rate hike jumping higher, leading USD north at the start of the week. Tuesday’s monthly CPI release (no annualised data due to govt shutdown last year) then saw both core and headline readings coming in above forecasts. Finally, we’ve heard a slew of hawkish fed commentary this week to accompany this batch of strong data. Most notably, Fed’s Waller put the prospect of a .5% hike on the table, voicing his support for a more aggressive move from the bank in light of inflationary pressures while Fed’s Logan voiced her support for two back-to-back .25% hikes.
PPI Data Next
Pricing for a December hike is now above 90% from lows of 70% ahead of the NFP data last week. Looking ahead today, focus will now be on October monthly PPI data. Expectations are set quite low here with both core and headline expected to have fallen against the prior readings. With that in mind and given the strength we saw in CPI data, there is room for a further upside surprise today. If seen, this should propel USD higher into next week with December rate hike expectations remaining fully entrenched.
Technical Views
DXY
The rally has seen the index breaking out above the bull flag and the prior 2026 highs with price now testing resistance at the 103.20. We’re seeing some light selling interest here but focus remains firmly on a continued push higher towards the 104.70 level next. Worth noting we are seeing some bearish divergence in momentum studies readings so any move back below the 102.80 level October highs could spark a quick retest of the broken flag pattern.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.