US Dollar, EUR/USD, USD/JPY: Key Levels to Watch Ahead of Inflation-Focused Week
In the latter part of February, the US dollar index lost momentum but found stability around 103.8 in the past week.
Simultaneously, the EUR/USD opened the week on a positive note, strengthening to the 1.08 level and showing signs of recovery against the dollar.
As for USD/JPY, it received support just below the 150 level last week, maintaining a positive outlook in favor of the dollar.
The primary driver behind the US dollar's movements remains inflation data. Strong January inflation data supported the Federal Reserve's reluctance to cut interest rates.
With the market continually postponing expectations of interest rate cuts, this development is likely to sustain dollar strength.
If February's CPI data aligns with January's, we might witness a more hawkish stance from the Fed compared to other major central banks.
This factor remains pivotal in supporting demand for the dollar due to its attractive yield.
Key data releases in the US this week include the core PCE price index, closely monitored by the Fed.
In December, the index increased by 0.2%, and the expectation for January is a potential 0.4% increase.
Should core personal consumption expenditures exceed expectations, the Fed might move slightly away from its dovish approach, leading the dollar to resume its upward trajectory after a brief pullback.
Furthermore, speeches from nearly 10 Fed members this week could introduce increased market volatility.
Looking at the dollar index from a technical perspective; DXY was seen slipping below the 104 level after being rejected near the 105 level in the middle of the month, partly towards the upper band of the ascending channel.
Although the recent momentum pushed the DXY out of the ascending channel, we see that the
Read more on investing.com
