Forex Today: US dollar longs squeezed ahead of US CPI

Here is what you need to know for Tuesday September 13:

It was a poor day for the greenback that fell to the worst level in more than two weeks against a basket of currencies at the start of the week. The dollar index, DXY, which measures the currency against six major counterparts, softened despite the firm anticipation that the Federal Reserve will hike interest rates by 75 basis points at its Sept. 20-21 meeting.

The sentiment had sent the index to a two-decade peak of 110.79 last Wednesday, but it fell to its lowest point since Aug. 26 at 107.81 ahead of Tuesday's US  Consumer Price Index. The headline Consumer Price Index in the United States is expected to fall to 8% year on year in August, while the core measure, which excludes food and energy, is expected to rise.

Meanwhile, fueling the drop in the DXY, the euro climbed to more than a three-week high against the dollar, with European Central Bank officials calling for additional aggressive monetary tightening. Also, there was some news that Ukrainian forces have made significant progress in pushing back Russian troops and that too has supported a better tone across European markets. The European common currency rose around 1.5% to 1.0198, its highest since August. 17, and well up from a 20-year lows of 0.9862 scored last week. 

AUD/USD started off the week better bid and is up some 0.61% in late North America trade after giving back territory from the highs scored at the start of the shift near 0.69 the figure. The currency pair rallied from 0.6824 and remains in bullish territory due to the softness of the greenback. 

As for the yen, the greenback was up slightly against the Japanese currency with the pair meeting 143.50,  but off its 24-year high of 144.99 hit last week. Traders are on the lookout for Japanese officials hinting at intervention to stop the currency from weakening further. On the weekend, a senior official of the government said in a local television interview that the administration must take steps as needed to counter excessive yen declines.  However, the Bank of Japan's ultra-accommodative stance is expected to remain unchanged at its next scheduled meeting on Sept. 21-22.

The CAD rose to 1.2963 from 1.3045 and with no Canadian data that had been scheduled for release on Monday, the focus remained on the Bank of Canada's recent hike of 75 basis points. The central bank said more tightening will likely be needed to bring down inflation. The next BOC meeting is scheduled for Oct. 26.

As for the pound, this rose to 1.1710 from 1.1600. UK industrial production fell slightly in July after a larger June decline, though manufacturing output rebounded modestly after a June drop, data released earlier Monday showed. Looking ahead, UK employment data is scheduled for release on Tuesday followed by inflation data on Wednesday and retail sales on Friday. Those awaiting the Bank of England's monetary policy meeting will need to now hold on until Sept. 22 due to the 10-day mourning period following the passing of Queen Elizabeth II.

Elsewhere, The main US indexes have now risen four straight days. Cryptocurrency investment products and funds, on the other hand, saw total outflows for a fifth straight week, totalling $63 million in the week ended Sept. 9, according to a report from digital asset manager CoinShares on Monday. Cryptocurrency investment products and funds saw total outflows for a fifth straight week, totalling $63 million in the week ended Sept. 9.

The gold price, meanwhile, has rallied at the start of the week in a move that was forecasted in the weekly pre-open analysis here: Gold Price Forecast: XAU/USD bulls eye a 61.8% golden ratio daily target.  At the time of writing, gold was 0.75% higher on the day having travelled from a low of $1,712.04 to a high of $1,735.18 so far, piercing into the 61.8% Fibonacci of the daily bear impulse. 

• EUR/USD Price Analysis: Bears eye a move to 1.0050

• AUD/USD bulls meet strong resistance at 0.69 the figure

• Gold Price Forecast: XAU/USD bulls are in control and take on a key resistance area