- The dollar continued to rally and broke above H4-period trend resistances, potentially challenging daily resistances as the outcome of U.S. August PPI rose. Investors await the expected-increase CPI in August due to release today.
- We will have policy decision and meeting minutes from BOE at 19:00 BJT today. Be aware of its implications for the sterling and for the dollar index as well, more or less.
U.S. reported its PPI in August Wednesday (13 September). The headline reading rose, however, worse than expected. We will have U.S. August CPI today and its core measure is expected to rise 0.2% MoM by economists. A series of hurricanes may not have any negative impacts on the economy in August, instead push oil prices higher. A rising oil price could result in increases in the overall inflation. However, a weaker inflation could dampen expectations of another rates hike by FOMC by the end of the year and derail the rarely-seen rally in the dollar.
The dollar index (DXY) rallied above H4-period trend resistance. Its short term moving averages went higher strongly and about to cross above its long term moving averages which tended to move up after moving towards each other quickly in response. The upside resistance level to watch is at around EMA169. In addition, the implications of the CPI data are worth keeping an eye on as well.
（DXY H4 chart）
As to non-U.S. currencies, the euro declined below H4-period trend supports to daily EMA30. It will be interesting to watch whether or not the single currency could stage a corrective rally. The sterling reacted off highs and slipped by as much as more than 140 pips on the day, targeting H4-period trend supports in the short term. BOE’s policy decision today is in focus. The Aussie dollar declined below a major support at H4-period EMA60, suggesting its uptrend could come to an end. The failure to regain the significant support this morning validates its potential downtrend and the pair could turn lower successfully going forward.
（GBP/USD H4 chart）
Switching gears over to the precious metals now, the gold started a downtrend after its rally failed to clear upside resistances. Its short term moving averages turned lower after contraction and distanced themselves from its long term moving averages which tended to converge after contraction further. Whether or not its long term moving averages could go down along with its short term moving averages after convergence will be interesting to observe. In addition, whether or not the price action of the yellow metal will extend potential losses in the short term after consolidation will be important to watch.
（Gold H4 chart）
By JasonZou —— Chief Analyst of AvaTrade China
Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.