The US dollar index broke the 106.00-mark last week, hitting its highest level since early November. The currency is strengthening against major peers amid an environment of rising US yields and warm inflation data favoring the US dollar.
In addition, Federal Reserve (Fed) officials have expressed less chance of cutting interest rates this year, and the increase in betting is another factor strengthening the currency.
On Wednesday, inflation measured by the US Consumer Price Index (CPI) accelerated in March, which made US Treasury yields rally, and markets are now expecting a more aggressive Fed.
Consumer Price Index (CPI), reported by the US Bureau of Labor Statistics, rose to 3.5% YoY in March, a jump from February’s 3.2%. The core CPI also accelerated.
Further, Thursday’s data showed the producer price index (PPI) rose 0.2% month-on-month in March, compared with an 0.3% increase expected by economists polled by Reuters. On a year-on-year basis, it rose 2.1%, versus an estimated 2.2% gain. The U.S. currency retreated after the PPI news but has rebounded.
A separate report showed 211,000 U.S. initial jobless claims for the week ended April 6, compared with a forecast for 215,000, reflecting persistent labor market tightness. The dollar barely responded as investors focused on inflation.
On the other hand, The geopolitical tensions between Israel and Iran intensified over the weekend, as Iran launched drones toward Israel late Saturday, the Israeli military announced, which also added in recent gains.
Citing the Islamic Revolutionary Guard Corps, Iran’s state-run media reported that dozens of drones had been fired in retaliation to the suspected Israeli attack on Iran’s consulate in Damascus on 1 April.
This week, Core retail sales, few fed members speech will be in focus.
Technical Outlook – US Dollar
US Dollar index witnessed 1.66% weekly gain. That was a highest gain since 8 May 2023. The currency made a high 106.109 and settled at 106.013 compared to previous week close of 104.2870.
On the weekly chart, formation of a long bullish candle stick is indicating for a strong demand in the currency and it could be strength further. However, it would need to cross immediate resistance 106.3525, for the upside resistance 106.80-107.2500.
On the downside, crucial support is seen at 105.32-103.8025.00
Overall sentiment expects to remain fragile following the geopolitical tension and jitters of Fed rate cut.
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Commodity Samachar
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