US Dollar Price Action Ahead of CPI and FOMC: EUR/USD, USD/JPY, Gold

US Dollar Price Action Ahead of CPI and FOMC: EUR/USD, USD/JPY, Gold

The US Dollar has experienced a strong bounce from support since last Friday’s Non-Farm Payrolls (NFP) report, setting up key resistance tests as markets prepare for tomorrow’s Consumer Price Index (CPI) release and next week’s Federal Open Market Committee (FOMC) meeting.

Key Highlights:

• The US Dollar Index (DXY) rebounded from the 105.44 level following Friday’s NFP report, which aligns with prior technical levels.

• EUR/USD continues to test support near the 1.0500 level, representing a significant component of USD price action.

• USD/JPY is pushing resistance near the 151.95 level, while gold is breaking out towards the 2700 mark.

DXY Technical Overview

After testing the 105.44 support level, which coincided with previous swing highs and a descending trendline, the DXY has rallied to test the 106.50-106.88 gap created during last November’s FOMC rate meeting. This bounce highlights the critical importance of the upcoming CPI report, with headline inflation expected to increase to 2.7% (YoY) from 2.6%, while core inflation is projected to remain steady at 3.3%.

Daily Price Chart Insights: The DXY’s response to CPI data could set the tone for the broader market. Continued strength may bring a retest of the 108.00 level, while a weaker-than-expected CPI could trigger a pullback.

EUR/USD: Struggling at Support

The Euro, which makes up 57.6% of the DXY, remains a key factor in USD movements. EUR/USD’s two-year range between 1.0500 and 1.1200 was broken last month, with sellers defending resistance near the 1.0611 Fibonacci level. However, recent price action suggests buyers are finding it challenging to break below 1.0500 decisively.

Shorter-Term Perspective:

• Resistance: 1.0611 (Fibonacci level)

• Support: 1.0500 (psychological level)

USD/JPY: Testing Resistance

USD/JPY is at a crucial juncture, with resistance at 151.95 coinciding with the 200-day moving average. Bulls have maintained control since early December, driving higher-highs and higher-lows above the psychological 150.00 level.

Key Levels to Watch:

• Resistance: 153.41 (descending triangle support turned resistance)

• Support: 150.77 (short-term floor) and 150.00 (psychological level)

Gold: Bullish Momentum Builds

Gold has staged a strong recovery, breaking out of its recent range and approaching the 2700 psychological level. Support has consistently held near 2617-2621, allowing for higher-highs and higher-lows to form.

Key Resistance Levels:

• 2685 (recent resistance)

• 2700 (psychological level)

Broader Implications

As the US Dollar navigates critical resistance levels, its path will significantly influence broader market trends. The CPI release and FOMC meeting will serve as pivotal events shaping USD, EUR/USD, USD/JPY, and gold price movements. Traders should remain vigilant, particularly regarding shifts in Federal Reserve policy and global risk sentiment.