US dollar rally hits a CPI speed bump

Trade tensions eased somewhat, and that sparked a rally in global equity indices. Wall Street joined the party. The Dow Jones Industrial Average jumped to 24,868.26 at the open compared with yesterday’s closing price of 24,802.90. The S&P 500 is up 0.56% to 2,789.31. Wall Street traders took solace from this morning’s tiny miss in headline inflation data. US June CPI rose 0.1%, below the 0.2% gain expected.

The equity market bounce and the CPI data took the wind out of the sails for the US dollar rally, at least for the time being, but the price action has been uninspiring.

EURUSD has bounced within a 1.1652-85 range since New York opened. The intraday technicals are bearish following the break of uptrend line support at 1.1690 which suggests further weakness to 1.1590.

The commodity currency bloc is struggling to gain upside traction during this lull in US dollar demand.  AUDUSD and NZDUSD continue to be weighed down by China/US trade tensions, and dovish domestic central banks. AUDUSD has climbed from 0.7370 in early New York trading but its bumping into resistance in the 0.7405-10 area. The trend is still negative, and it is well-below Monday’s 0.7480 peak.

Oil prices have had a nasty 24 hours. Oil was hammered yesterday due to the US dollar and concerns of fresh supply from Libya. WTI oil fell from $74.07/barrel to $69.91/b today. Prices are consolidating just above the bottom thanks to the International Energy Agency warning that “production losses could impact the global “supply cushion.”

USDJPY broke above 111.40 overnight, and it hasn’t looked back   A break above 112.80 opens the door to a test of the 2018 peak of 113.40.

 
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Chart: USDJPY daily.                                                                                                                              Source: Saxo Bank

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