News Tech: The dollar fell below key support levels on Thursday as December US inflation turned out to be less than expected, prompting investors to unwind their overly inflated long positions. After months in a tight range, the dollar fell 0.6% against the euro on Wednesday to $1.1453, its lowest since mid-November. There is no major chart resistance for further losses until $1.1525. In Asia, it was $1.1443. The pair also fell 0.6% against the yen, falling from the support of 115 to 114.38 yen to the dollar, its lowest level in more than two weeks. The previous purchase was 114.55 yen.
“I don’t think it was anything within the components of the CPI that caused the market to take a sigh of relief,” said NatWest markets’ strategist Jan Nevruzi in a note. “Would a 6.7% or 7.3% print really have changed the Fed’s trajectory in the next few months or this year – I do not think so”. The best performing majors in a fairly quiet Asian day were the kiwi and sterling as central banks in both places look to be on an even more aggressive path than the Fed.
The weakness in the dollar helped the Australian dollar break through resistance, pushing it past the 50-day moving average to $0.7292, a nearly two-month high held during the Asian session. His December U.S. monthly inflation rate, released Wednesday, came in slightly above forecast, with the CPI up 7% year-on-year as expected. This was his biggest rise since June 1982, but the trader already hawkish does not recognize the urgent need to delay his Fed too much. With at least three of his rate hikes already factored into market prices, some investors have lowered their bets on further dollar appreciation.
Sterling, which has been rallying as traders reckon Britain’s economy can survive a surge in COVID-19 cases and that the Bank of England is going to get started on hikes as soon as next month, is testing its 200-day moving average at $1.3717. It is up 4% from December lows and traders have so far shrugged off a political crisis enveloping Prime Minister Boris Johnson who apologized for attending a party in the Downing Street garden during a coronavirus lockdown. Hikes have already begun in New Zealand and the New Zealand dollar has touched its 50-day moving average at $0.6862, a gain of 0.2% in the session.