Long

DXY D1 - Long Signal (relief rally)

The US Inflation data came in with another surprise lower, declining faster than expected. The Core CPI YoY slowed down to 4.8% in June, down from 5.3% in May. This is the lowest core inflation print since October 2021. This is also the biggest drop since January 2021. On the other hand, the US CPI YoY dropped to 3.0% down from 4% during the same period, posting the lowest reading since March 2021 and the biggest drop since May 2020. The data was enough to shift market expectations significantly. Prior to the data, markets were pricing in the possibility of 3 more rate hikes before the end of the year, now markets are pricing in only one more rate hike in July’s meeting.

The US dollar index declined sharply right after the inflation data announcement, breaking multiple key support areas, reaching as low as 100.40 by NYSE closing bell, which is the lowest daily close since April 2022. In addition, the index posted the biggest daily decline since November 2022. With this daily close, it’s safe to say that the downside trend has resumed. Since expectations shifted significantly, the index is now pricing in one more rate hike before the next easing cycle. The next support area stands at 100.0 psychological support, which should be watched carefully, as buyers are likely to appear.

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