December’s US CPI rates weaken USD

The USD retreated across the board yesterday as the US December CPI rates release created bearish tendencies for the greenback. It should be noted that the headline CPI rate for December accelerated as was expected reaching 7% yoy, which is the highest level reached for the rate since 1982, yet that did not seem to worry traders as it may have been deemed insufficient for the Fed’s monetary policy to become even more hawkish. It should also be noted that on a month-on-month level the rate slowed down albeit not as much as expected, yet nevertheless may have implied that the advance of inflationary pressures may be losing some steam. Today, we note the release of the PPI rates for December and please note that the PPI rate forecasts are similar to what was expected for the release of December’s CPI rates for the US.

We would also like to turn our attention to the US employment market as we get the release of the US weekly initial jobless claims figure. On the monetary front, we note that Fed Board Governor Brainard is to testify before the Senates’ Banking committee for her nomination hearing but also Richmond Fed President Barkin and Chicago Fed President Evans are scheduled to speak. Please bear in mind that US stockmarkets tended to end their day in the greens given that the US inflation rates’ acceleration did not surpass expectations and may not warrant a more aggressive monetary policy tightening. Gold’s price also tended to gain from the release and the weakening of the USD, as the precious metal is also considered a hedge against inflationary pressures and is currently near a one week high, yet the bulls seem to be advancing at a slower pace.

Moving to Oceania, AUD gained against the USD, benefiting from USD’s weakness yesterday and investors’ turn towards growth or if you prefer commodity currencies. During Friday’s Asian session, Aussie traders and Australian exporters of raw materials are expected to keep a close eye on the release of Chinas’ December trade data. Despite China’s trade balance may be regarded as the key indicator for the release Australian exporters of raw materials may prefer to concentrate on the release of China’s import growth rate which is expected to slow down and if so, could weaken AUD. Australia’s trade data for November, showed a narrowed trading surplus and should China’s import growth rate also slow down for December, the trading data of Australia may show a worrying picture for December as well, as the potential of further narrowing of Australia’s trade surplus cannot be excluded.

AUD/USD was on the rise yesterday yet seemed to find some resistance at the 0.7290 (R1) level. To abandon our bias for a sideways movement in favour for a sideways movement we would require a clear breaking of the 0.7290 (R1) level, in order for un upward trendline to be formed. Please note that the RSI indicator below our 4-hour chart is at the reading of 70, which on the one hand confirms the bullish sentiment yet may also imply that the pair is ripe for a correction lower. Should the bulls actually maintain control over AUD/USD, we may see it breaking the 0.7290 (R1) resistance line and aim for the 0.7365 (R2) level. Should a correction lower take place we may  see the pair reversing course and aim if not breach the 0.7230 (S1) line.

Dow Jones on the other hand seemed to maintain a sideways motion, remaining just below the 36260 (R1) line. We tend to maintain our bias for a sideways motion, given also that the RSI indicator below our 1-hour chart is near the reading of 50, implying a rather indecisive market. Should buyers be in charge of the index’s direction, we may see it breaking the 36260 (R1) and take aim for the 36570 (R2) level. Should a selling interest be displayed the market we may see the index taking aim for the 35965 (S1) level.  

Other highlights for today and early tomorrow

Besides the releases mentioned we also note Japan’s current account balance for November due out during tomorrow’s Asian session.

US30 Cash H1 Chart 

Support: 35965 (S1), 35600 (S2), 35340 (S3)

Resistance: 36260 (R1), 36570 (R2), 36940 (R3)

AUD/USD H4 Chart 

Support: 0.7230 (S1), 0.7170 (S2), 0.7100 (S3)

Resistance: 0.7290 (R1), 0.7365 (R2), 0.7430 (R3)

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