The USD is under more pressure from yesterday's CPI data
The US CPI data came in within forecasts as the statistics met expectations, leaving global markets unsure of what to do next. The dollar swung back and forth not just in the immediate aftermath, but even before traders and investors looked between the lines to interpret the data as being on the weaker side.
If you're trading on the data, that'll be a big killer because the market was a little unsure an hour or so following the main risk event.
However, the dollar eventually fell as expectations of a more aggressive Fed were reduced, with some market participants now expecting a 25 basis point rate rise next.
In my opinion, the two most important charts for the dollar right now are those against the euro and the yen.
In the case of the EUR/USD, the move yesterday validated the break over the previous resistance of 1.0700, with buyers now taking out 1.0800.
This opens the way to the 50.0 Fib retracement level of the swing lower from 2021, which is expected at 1.0942 next. All of this is before we get to the next significant psychological barrier level of 1.1000, which many market participants are pinning today following yesterday.
The USD/JPY then saw a significant collapse, falling from 130.00 to its lowest level since 1 June. However, the move is partly influenced by recent BOJ conjecture, and I would argue that it was not so much the CPI data that produced such ripples in the pair yesterday.
The bearish momentum was mostly carried over from Asia, where there is growing concern that the BOJ may attempt to further adjust or at least hint at a policy shift at its meeting next week.
In any event, a break below 130.00 puts sellers in an excellent position to pursue a further negative break towards the May lows around 126.55-65, with the 125.00 mark a critical level to watch.