Following on from my potential trade idea yesterday, we saw a slight move down to the 20-day simple moving average at 102.23. This seems to be the area the market is happy to support, with good levels of buying.
At 22:30 AEST today we’re due to get US CPI. A slight tick lower in inflation is expected, with the headline print expected to pull back to 2% (from 2.1%).
Core inflation is also expected to fall around ten basis points to 1.9%. I feel there are slight upside risks here.
While the Fed looks at core personal consumable expenditure (PCE), headline inflation is still very important for measuring ‘real’ yields (ie adjusting bond yields for inflation). The higher the real yield, the more attractive the underlying currency.
On the docket, we also have July housing starts and building permits, with economists expecting an 8.1% and 2.8% increase on the month. This should help sentiment towards the USD.