US DOLLAR INDEX SKYROCKETS FED TIGHTENING HOPES RISE

The US dollar index surged to the highest level since July 2020 after strong economic data from the United States. This month, the US has published strong non-farm payrolls and inflation data. And on Tuesday, the country released spectacular numbers. The data showed that the country’s retail sales jumped from 0.8% to 1.7% while core sales rose from 0.7% to 1.7%. Further data revealed that import and export prices and manufacturing and industrial production numbers did well. Therefore, the market believes that the Fed will turn more aggressive in the coming months. Later today, the US will publish the latest building permits numbers that analysts expect will be strong.

The British pound held steady as investors reflected on a slew of positive economic numbers from the UK. Last week, data by Nationwide Society showed that the country’s home prices kept rising in October. On Tuesday, numbers showed that the labour market is tightening. For example, the unemployment rate declined to 4.4%, which is the lowest level since the pandemic started. The country has the second-lowest unemployment rate in the G7 after Japan. The currency will be in the spotlight today since the UK is also expected to publish strong inflation numbers.

The economic calendar will have some key events today. In addition to the UK inflation data, the Eurozone and Canada will publish their inflation numbers. Analysts expect these numbers to show that inflation jumped sharply in October. For Europe, the situation will likely worsen. In a statement yesterday, the CEO of Trafigura warned that the bloc will see more power shortages in the fourth quarter. And yesterday, Germany suspended the certification of Nord Stream 2, which pushed gas prices higher. Elsewhere, the Energy Information Administration (EIA) will publish the latest inventories numbers.

EURUSD

The EURUSD pair has been in a steep sell-off in the past few days. The pair has moved from a high of 1.1600 this month to a low of 1.1330. It is also approaching the lower side of the descending channel. It has also moved to the lower side of the Bollinger Bands. The Williams %R has moved to the oversold level. Therefore, while the overall trend is bearish, the pair will likely have a relief rally when it hits the lower side of the channel at 1.1300.

USDCHF

The USDCHF soared to the highest level since October 14 as the US dollar strength continued. The pair has managed to move above the 61.8% retracement level on the four-hour chart. It has also rallied above the 25-day moving averages while the Relative Strength Index (RSI) has risen to the overbought level. Therefore, the pair will likely keep rising as bulls target the year-to-date high of 0.9368.

GBPUSD

The GBPUSD pair has been relatively stable even as the US dollar has strengthened. The pair is trading at 1.3440, where it has been in the past few days. Notably, it has formed a bearish flag that is shown in green. It has also moved below the 25-day moving average while oscillators are facing upwards. Therefore, the pair will likely break out lower after the UK inflation data.