US CPI was released earlier today as the headline number MoM for October came in stronger than expected at 0.4% vs 0.3% expected and 0.0 in September. However, the more important component of the data was the release of US Core CPI YoY. This is one of the major data points which the Fed watches to get a better gauge of true inflation as it excludes food and energy prices. The US Core CPI YoY for October was slightly weaker at 2.3% vs 2.4% expected and 2.4% last. Note that this figure is still above the Fed’s target rate for inflation of 2.0%.
Speaking of the Fed, today Fed Chairman Powell is set to speak today at 11:00am EST in front of the Joint Economic Committee (JEC) to give the Fed’s updated views of the US Economy. Chairman Powell stated recently that the economy “is in a good place”. Markets will be looking to see if he echoes these comments today. If so, this will confirm the FOMC’s sentiment that interest rates are on hold for the time being. The CME FedWatch Tool is currently pricing in a 96% chance of the FOMC leaving rates unchanged at its December 11th meeting.
The US Dollar Index (DXY), in particular, will be paying attention to any signs from Powell of a change an expected change in inflation and employment. On a weekly chart, price as been trading in an upward sloping channel since May 2018. Price tried to break lower out of the channel a few weeks ago, however ran into support and was rejected at the upward sloping bottom trendline of the channel and the 50-week moving average.
Source: Tradingview, City Index
On a daily timeframe, we can see clearly that the DXY formed a flag near the lows and tried to break lower through the channel support and the 200-day moving average, only to fail as bulls gained control and turned it higher back into the channel range.
On a 240-minute chart, price put in a double bottom at the lows near 97.15. The target for a double bottom is the height of the pattern added to the breakout point. This level of 98.60 coincides with previous support (which now acts as resistance) as well as the 61.8% Fibonacci retracement of the highs on October 1st to the lows on November 1st. Price has currently stalked near 98.38, near the 50% retracement of the previously mentioned timeframe. Horizonal support below near the breakout point at 97.87.
Source: Tradingview, City Index
Watch for the text of Powell’s statement to be released before the actual testimony. The Question and Answer session to follow will most likely be just as important as the text itself!
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.