Dollar is trading on cautious nodes since morning. The Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.40% lower at 102.86.
U.S. dollar retreated from day’s high ahead of latest readout of U.S. consumer inflation data. Data will released at 7pm later today. The data could provide further clues on the Federal Reserve’s policy outlook.
The U.S. central bank raised interest rates by 25 basis points in the last policy meeting. Tempering the pace of Fed rate hikes. Howerver, bank policymaker was keen to say that fight against inflation continues and further increases should be expected.
Thereby, focus is turned on January inflation report. Core CPI data is expect to come slightly lower at an annual pace of 6.2% in January month. From 6.3% in December and well below June’s four-decade peak of 9.1%. Adding to this, CPI data expected to come slightly lower at 10.3% from the previous reading of 10.5%.
That said, markets are also wary of any potential bigger-than-expected surprises in core inflation, which excludes volatile energy and food prices, as the labor market remains strong, potentially powering wage growth.
If the data will remain slower than previous reading, only that case dollar could extend its recent fall.
Dollar index is trading on a verge of crucial support 102.55 which coincided with its previous swing resistance. Today, a break below 102.55 will extend the recent losses and it could test 101.80-101.55.
The momentum indicator, RSI 14 and its 9 SMA is also trying to give a negative crossover, if it does then will also support negative momentum in near future.
Alternatively, on upside massive resistance seen at 103.35 level. A break above will open the door for 103.55-104.25.Overall sentiment will depend on CPI data. If dollar index show negative momentum than it would be positive for bullions and metals to