Inflation high, dollar retreating

Inflation in the US in December was 7%. and was the largest since June 1982., according to the data we got to know yesterday. After their publication, the US dollar seems to depreciate.

The rate of the main currency pair EUR / USD It broke forcefully through the potential resistance level at $ 1,1380 on Wednesday and seems to be rising fairly quickly towards 1,1450. As a result, the euro seems to be the most expensive in relation to the dollar in two months. This exchange rate was most recently observed in the first half of November 2021.

It may also mean a break from the consolidation that has been going on in this market since the beginning of December. The weakness of the US currency, against other major currencies, may be most marked against the British pound. Course GBP / USD appears to have risen continuously for four weeks, reaching levels at the end of October 2021.

Possible bigger USD price correction?

It is also worth paying attention to the positioning on US dollar futures. According COT report published by the committee CFTC the number of net long positions on the USD index contract rose to 39k last week. from 31 thousand in mid-December.

At the same time, the index price did not rise and seemed to hover at 97 points. This could mean that despite the increase in net long positions, buyers have not been able to raise the market, which may in turn lead to disappointment. If so, then in the case of closing long positions there could be a greater correction in the quotations of dollar index futures.

Fed: US ready for higher rates

So it seems that in the dollar market the scenario may be realized, buy rumors, sell facts. Inflation in the US was confirmed at 7%, and a little earlier, Federal Reserve chief Jerome Powell dispelled expectations of a more hawkish Fed approach to financial policy in his testimony to Congress earlier this week, admitting that the US economy is ready for higher rates percentage and quantitative tightening to fight inflation. He added policymakers are still discussing the approach to cut the Fed's balance sheet, which could take up to four meetings to come to such a decision.