U.S. CPI and Dollar Index in Details

The CPI Reading Details

After the inflationary plateau we faced in the last CPI report on Wednesday, the speculations are rising that the Fed will also slow its tightening strategy.

The CPI was unchanged in July on a seasonally adjusted basis after rising 1.3% in June, the U.S. Bureau of Labor Statistics reported on Wednesday. Over the last 12 months, all items index increased 8.5% before seasonal adjustment. The all-items index increased 8.5% for the 12 months ending July, a smaller figure than the 9.1% increase for the period ending June.

Furthermore, when we take deeper look at the details of the report, we will notice that the index for all items less food and energy rose 0.3% in July after increasing 0.7% in June. Meanwhile, the shelter index continued to rise by 0.5% in July compared to 0.6% in June. Additionally, the rent index rose 0.7% in July and the owners’ equivalent rent index rose 0.6%.

Furthermore, the medical care index rose 0.4% in July after rising 0.7% in June as major medical care component indexes continued to increase. The index for hospital services increased 0.5% over the month, while the indexes for physicians’ services and for prescription drugs both increased 0.3% in July. However, the overall food components of the index rose are still rising by 1.1% while food at home rose 1.3%.

That leads us to a conclusion that the plateau we saw in the inflation remains not fully relieving and shows that the inflation figures need to be red in details.

U.S. Dollar Index Technical Reading

The U.S. Dollar index is expected to remain committed to the uptrend as long as it is trading above 103.50 despite breaking below the long/medium terms channel to 104.75.

In the mini-frames (1H,30M) the index is forming a support in the range between 104.50 and 104.60 which is still holding the index since June 29^th. Additionally, Fibonacci retracement signals a double bottom formation that will bounce after hitting the previously mentioned support range on the hourly chart. Meanwhile, RSI is showing high sell-off at the current price levels while MACD signals further fall.

PIVOT POINT: 104.70

On the other hand, the daily chart shows a strong support between 103.50 and 103.60 but raises two scenarios to the play. The first scenario, which is the likely one, the index will hit the support and bounce back to the main uptrend channel. The other scenario, the index will break the support level and change the direction entirely into a new downtrend.

PIVOT POINT: 105.00

Trading wise, the short-term trading (intraday trading) will be towards short positions between 104.60 and 104.50. Medium term trading the focus should be more on following the swings between 104.60 and 104.15. However, the long-term trading it is recommended to keep it limited as the reading is conditional.