The US Dollar’s Decline After Inflation Data Release

US economic indicators suggest slowing inflation and unchanged retail sales, hinting at potential interest rate cuts. The S&P 500 hits an all-time high, while gold surges. USD/JPY shows bearish trends, with key support levels being closely monitored.

Key economic indicators for the US were released recently, impacting the financial landscape:

  • Core Price Index (CPI) monthly: actual = 0.3%, expected = 0.4%, previous = 0.4%
  • Core Price Index (CPI) annual: actual = 3.4%, expected = 3.4%, previous = 3.5%
  • Retail Sales monthly: actual = 0.0%, expected = 0.4%, previous = 0.6%

Despite concerns over rising inflation, retail sales remaining unchanged hint at potential interest rate cuts, as per Reuters.

This news led to significant reactions in financial markets, notably a weakening of the US dollar:

  • Market participants reacted to signs of slowing inflation, raising expectations for rate cuts and pushing the S&P 500 stock index (US SPX 500 mini on FXOpen) to an all-time high.
  • Gold prices also surged to levels not seen since April 21.
  • Other currencies gained strength against the US dollar.

An intriguing trend is unfolding on the USD/JPY chart, with Fibonacci ratios revealing three instances where price recovery stalled around the 0.382 level:

  • Recovery from B to C after an impulsive decline from A to B.
  • Recovery from D to E following a decline from C to D.
  • Recovery from F to G after a 3-wave decline from A to F.

FXOpen graph

Technical analysis of USD/JPY suggests fading demand with each attempt to resume the upward trend within the blue channel. The local peak at G indicates resistance along the median line, potentially signaling continued bearish dominance and downward price movement. If this trend persists, support levels at 151.85, 150.88, and the psychological level of 150.00, along with the lower channel boundary, will be crucial tests for bearish intentions.

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