Week Ahead: USDInd set for volatile price swings?

• USDInd ↑ 3% year-to-date

• Trump victory sends USDInd to highest level since July

• Fed speeches + US CPI report = fresh volatility?

• US CPI sparked moves of ↑ 0.7% & ↓ 0.6% over past year

• Key levels of interest – 104.80, 104.40 and 103.90

With the US election done and dusted, the focus shifts back to key data from across the globe:

Saturday, 9th November

• CN50: China PPI, CPI
• JP225: Bank of Japan Governor Kazuo Ueda speech
• EU50:  European Central Bank President Christine Lagarde speech

Monday, 11th November

• JP225: Japan current account

Tuesday, 12th November

• AU200: Australia consumer confidence
• GER40: Germany CPI, ZEW survey
• ZAR: South Africa manufacturing production, unemployment
• UK100: UK jobless claims, unemployment
• USDInd: Fed Governor Christopher Waller, Richmond Fed President Tom Barkin, Philadelphia Fed President Patrick Harker speech

Wednesday, 13th November  

• CHINAH: Tencent earnings
• EU50: Eurozone industrial production
• JP225: Japan PPI
• USDInd: US CPI, Fed speeches

Thursday, 14th November

• AU200: Australia unemployment, RBA Governor Michele Bullock speech
• EU50: Eurozone GDP
• USDInd: US PPI, jobless claims, New York Fed President John Williams, Fed Chair Jerome Powell speech
• UK100: BOE Governor Andrew Bailey speech
• US30: Walt Disney earnings

Friday, 15th November

• HK50: China retail sales, industrial production, Alibaba earnings
• CAD: Canada manufacturing sales, existing home sales
• JP225: Japan Q3 GDP, industrial production
• UK100: UK GDP, industrial production, trade balance
• USDInd: US retail sales, Empire manufacturing, industrial production

Our attention falls on FXTM’s USDInd which could be rattled by key US data and Fed speeches including Jerome Powell.

Besides, it would be a crime to overlook the index after its aggressively bullish reaction to Trump’s US election win. Prices jumped almost 2% mid-week on the “Trump trade” before giving back post-election gains as the Pound and Yen gained.

The Federal Reserve also contributed to the USDInd recent weakness after cutting interest rates by 25 basis points to 4.5%.

The USDInd tracks the dollar’s performance against a basket of six different G10 currencies, including the Euro, British Pound, Japanese Yen, and Canadian dollar.

With all the above said, the USDInd could see more price swings. Here are 3 reasons why:

    1) US October CPI report

The October US Consumer Price Index (CPI) report published on Wednesday 13th November could impact Fed cut bets for December and beyond.

Markets are forecasting: 

• CPI year-on-year (October 2024 vs. October 2023) to rise 2.6% from 2.4% in the prior month
• Core CPI year-on-year to remain unchanged at 3.3%
• CPI month-on-month (October 2024 vs September 2024) to remain unchanged at 0.2%
• Core CPI month-on-month to remain unchanged at 0.3%.

Headline and core CPI inflation is expected to remain unchanged at 0.2% and 0.3% MoM in October, but the year-over-year headline number is expected to rise 2.6% from 2.4%.

Over the past 12 months, the USCPI has triggered upside moves of as much as 0.7% or declines of 0.6% in a 6-hour window post-release.

Further evidence of cooling price pressures may support the case for another rate cut in December.

Traders are currently pricing in a 74% probability of another 25 basis point rate cut by the end of 2024.

• A softer-than-expected US CPI report has the potential to drag the USDInd lower.

• Should the CPI report beat market forecasts, the USDInd could push higher.

    2) Key data + Fed speeches

A string of key US economic data and speeches by numerous Fed officials could result in more volatility for the USDInd.

Investors will direct their attention towards the latest US retail sales report, Producer Prices Index (PPI), and initial jobless claims among other data to gauge the health of the US economy. Speech by various Fed officials including Jerome Powell on Thursday may offer fresh insight and clues on the Fed’s next move.

• Should overall US economic data paint positive picture and Fed speakers sound hawkish, this could hit Fed cut bets – supporting the USDInd as a result.

• If US economic data disappoints and Fed officials adopt a dovish stance, the USDInd may weaken as expectations around a December rate cut increase.

    3) Technical forces

The USDInd remains in an uptrend on the daily charts but bulls and bears seem entangled in a fierce tug of war. Prices are trading above the 50, 100 and 200-day SMA but the Relative Strength Index (RSI) is trading near overbought levels.

• A breakdown below 104.40 could open a path toward the 200-day SMA at 103.90, 103.50 and the 100-day SMA at 103.10.

• Should prices push back above 104.80, this may open the doors toward 105.50 and 106.00.