US CPI in Focus: A Key Test for the Dollar

Good morning everyone,

Today could be very important for the markets, as we will get the US inflation report. Expectations are for no change on a yearly basis, at 2.7%. But if inflation comes in softer than expected, the Fed could have more room to cut rates, which would likely send the dollar lower. On the other hand, if the numbers come in hot, the dollar could see a rebound and possibly even a retest of the 99.31 resistance that we have focused on in recent updates.

It is also important to keep an eye on crude oil. Crude oil moved mostly to the downside in December, and this usually feeds into lower inflation readings. Therefore, I think there is a greater chance we will see a 2.7% or even lower CPI reading rather than higher numbers.

Another important point is the wave pattern on the dollar, which still looks very clear. We have five waves down followed by a three-wave recovery, now at resistance, so it feels like only a matter of time before the corrective channel around 98.50 is taken out. A daily close below that level would likely bring bears back into action and open the door for a drop toward the December 2024 lows.

GH

For a detailed view and more analysis like this, you can watch below our latest recording of a live webinar streamed on January 12: