US Dollar eases ahead of CPI while pressure on Biden builds

• The US Dollar eases ahead of a packed data release on Thursday.
• President Biden faces setbacks from famous supporters calling for him to step down. 
• The US Dollar index hovers around 105.00, though tilted to the downside. 

The US Dollar (USD) edges lower for a second day in a row when measured by the US Dollar Index. The Greenback does not have much reason to rally firmly, with uncertainty creeping in its valuation after big names such as Nancy Pelosi and actor George Clooney came out on social media asking for President Joe Biden to drop out of the race and pave the way for a better candidate. It is a big blow for the current ruling President as concerns keep biting away at the polling numbers. 

On the economic front, only one element counts on Thursday: the US Consumer Price Index (CPI) in all its forms and colours. Traders will want to see at least the disinflationary nature of the numbers being confirmed, which should keep markets on track for an interest rate cut in September. Add in the weekly Jobless Claims data, and the US Dollar might be easing a bit further on the back of any upticks in the Jobless numbers. 

Daily digest market movers: Finally, some moves to come

• At 12:30 GMT, different economic data will be released at the same moment. Let us walk you through the main numbers to focus on:
  • US CPI for June:
    • Monthly headline CPI is expected to tick up marginally by 0.1% from 0.0%.
    • Monthly core CPI should remain stable at 0.2%.
    • Annual headline CPI should increase at a slower pace of 3.1% from 3.3% in May.
    • Annual core CPI is expected to grow steadily at 3.4%.
  • Weekly Jobless Claims for the week of July 5:
    • Initial Claims are expected to head to 236,000 from 238,000.
    • Continuing Claims are seen heading to 1.860 million from 1.858 million.
• At 15:30 GMT, President of Federal Reserve Bank of Atlanta Raphael Bostic participates in a moderated conversation at the NCUA's Diversity, Equity, and Inclusion Summit in Minneapolis, United States.
• Equity markets are gearing up for the next earnings season, which gets underway with earnings from Pepsico and Delta before the opening bell on Thursday. Equities overall are in a good mood with solid gains in Asia and positive returns in Europe, while US futures are lagging a touch. 
• The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Fed officials. The odds now stand at 70.0% for a 25-basis-point cut. A rate pause stands at a 26.7% chance, while a 50-basis-point rate cut has a slim 3.3% possibility. 
• The US 10-year benchmark rate trades at 4.28% and remains near the lower level for the week.

US Dollar Index Technical Analysis: Make or break for September

The US Dollar Index (DXY) faces a key pivotal moment with the US Consumer Price Index release for June. This is the make-or-break moment for September rate cut prospects, with any uptick snapping the disinflationary trajectory that would mean that September meeting is off the table. So, expect markets to give a more significant probability of a further easing of the DXY than a stronger US Dollar. 

On the upside, the 55-day Simple Moving Average (SMA) at 105.14 remains the first resistance. Should that level be reclaimed again, 105.53 and 105.89 are the following nearby pivotal levels. The red descending trend line in the chart below at around 106.23 and April’s peak at 106.52 could come into play should the Greenback rally substantially. 

On the downside, the risk of a nosedive move is increasing, with only the double support at 104.81, which is the confluence of the 100-day SMA and the green ascending trend line from December 2023, still in place. Should that double layer give way, the 200-day SMA at 104.41 is the gatekeeper that should catch the DXY and avoid further declines. Further down, the correction could head to 104.00 as an initial stage. 

US Dollar Index: Daily Chart