Dollar Adjusts After the Publication of Inflation Data in the US

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Data on the Consumer Price Index (CPI) in the US, released yesterday, had a significant impact on the pricing of major currency pairs. According to the provided report:

  • The core Consumer Price Index, which excludes food and energy costs, increased by 0.3% from the previous month, while experts had forecasted 0.4%.
  • Retail sales remained unchanged at 0.0%, contrary to analysts' expectations of 0.4%.

As a result of the publication of such data, the dollar depreciated against almost all major currencies. For instance, the USD/JPY currency pair retreated from its peak at 156.60, the EUR/USD strengthened by more than 100 pips within a couple of hours, and buyers of the GBP/USD pair tested a significant resistance level at 1.2700.

The main reason for the sharp decline of the dollar against G-10 currencies is likely due to the possibility that slowing inflation growth and a weak labour market could prompt the Federal Reserve to change its monetary policy direction and reduce the base interest rate in the coming months.

USD/JPY

According to technical analysis of the USD/JPY pair on the daily timeframe, a "bearish engulfing" pattern has formed, the confirmation of which could contribute to a retest of the important area between 152.80-152.00. If dollar buyers manage to establish themselves above 154.90, the price may resume its upward movement towards recent highs around 156.00.

Macro-economic data that could influence the pricing of the pair in the upcoming trading sessions:

  • Today at 15:30 (GMT +3:00), the number of initial jobless claims in the US.
  • Today at 15:30 (GMT +3:00), the Philadelphia Fed Manufacturing Index (US).

EUR/USD

Weak data from the US led to a test of the important resistance level at 1.0890 by the EUR/USD pair. According to technical analysis of the EUR/USD pair on the weekly timeframe, we observe the confirmation of a "piercing line" pattern from April 14. The nearest area where the price may rise is within the range of 1.0980-1.0940. A downward retracement is possible towards 1.0810-1.0780.

Tomorrow at 12:00 (GMT +3:00), attention should be paid to the publication of the Consumer Price Index (CPI) data in the eurozone for April.