US Dollar steadies ahead of US CPI, Powell’s second day at Capitol Hill

LONDON (February 12) The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades flat around 108.00 after Federal Reserve (Fed) Chairman Jerome Powell kept his cards close to his chest when facing lawmakers on Tuesday at Capitol Hill. Powell did not leave many clues about the timing for another interest rate cut by the central bank, if any. Traders are mulling what to do next, with US yields slowly but surely starting to head higher this week. 

The economic calendar shows the Consumer Price Index (CPI) numbers for January are due on Wednesday. Expectations are not very big, with the monthly headline CPI expected to rise 0.3% compared to 0.4% in December. The monthly core CPI gauge is expected to tick up 0.3%, coming from 0.2% in the previous month. Meanwhile, Fed Chairman Jerome Powell will give a speech for the second day in a row at Capitol Hill.  

Daily digest market movers: Powell 2.0

• At 13:30 GMT, the US Consumer Price Index data for January will be released:
  • The monthly headline CPI measure is expected to rise by 0.3%, coming from 0.4% in the previous month.
  • The monthly core inflation gauge is expected to tick up to 0.3%, compared to 0.2% in December.
  • Stronger inflation numbers would fuel higher US rates and, in turn, trigger a stronger US Dollar (USD)
• At 15:00 GMT, Fed Chairman Jerome Powell will start his second day of testimony at Capitol Hill.
• At 17:00 GMT, Federal Reserve Bank of Atlanta President Raphael W. Bostic gives remarks at the Atlanta chapter of the National Association of Corporate Directors.
• At 22:05 GMT, Federal Reserve Governor Christopher Waller is set to speak at "A very Stable Conference: Stablecoin Infrastructure for Real World Applications" in San Francisco, California.
• Equities are facing some headwinds after the first day of Fed Chairman Powell’s testimony. Besides the German Dax hitting a fresh alltime high, overall most indices are trading with small gains or losses. 
• The CME FedWatch tool projects a 95.5% chance that the Fed will keep interest rates unchanged at its next meeting on March 19. 
• The US 10-year yield is trading around 4.54%, ticking up further for a third day in a row and recovering further from its fresh yearly low of 4.40% printed last week. 

US Dollar Index Technical Analysis: No clues

The US Dollar Index (DXY) is stuck in a game of Cluedo, and detective Fed Chairman Powell is not giving away much to nearly no clues. With traders left clueless about what or when the Fed will make its next move, slowly but surely, bonds are getting back in the graces of traders as a safe place to be in periods of uncertainty. With this, the US Dollar should solely but surely see some inflow and tick higher. 

On the upside, the first barrier at 109.30 (July 14, 2022, high) was briefly surpassed but did not hold last week. Once that level is reclaimed, the next level to hit before advancing further remains at 110.79 (September 7, 2022, high). 

On the downside,  107.35 (October 3, 2023, high) is still acting as strong support after several tests last week. In case more downside occurs, look for 106.52 (April 16, 2024, high), 106.21  (100-day Simple Moving Average), or even 105.89 (resistance in June 2024) as better support levels. 

FXStreet