As the eye can see, DXY is consolidating against all major currency pairs. Meaning its likely taking a slight breathing room before the major uptrend resumes. With the major CPI report due this week, all the eyes would be without a doubt on the numbers that would print. Anyhow there are two likely scenarios here that might take place and how it would affect the DXY:
SCENARIO 1: CPI PRINTED AS EXPECTED
If the CPI is printed as expected or slightly lower, it means that the FED'S weapon to lower the inflation is working slowly slowly however the numbers would still be considerably high near 8% YOY which is way way above FED'S target. This would mean that the FED might continue to raise rates to lower the inflation but not that aggressively. Meaning the DXY would still be more attractive compared to other currency long term. So its still bullish
SCENARIO 2: CPI PRINTED HIGHER THAN EXPECTED
If the CPI prints a lot higher than expected lets say it becomes 8.3% or higher, then we could practically assume that the FED'S tool is not working and they would likely take a more aggressive stance . The market's reaction at this point of time would be to BUY the DXY which would make the DXY appreciate.
Of the above two scenarios, number 1 seems to be more likely and practical. Shall scenario 1 take place, we can expect the DXY to consolidate and give us a buying opportunity at a good price.
TECHNICAL ANALYSIS ON USDCAD LONG TRADE
Here we have USDCAD weekly chart, we can likely expect this pair to retrace lower which would give us an ideal entry before the major uptrend resumes. Kindly for the technical analysis have a look at the main chart.
Trade Safely & Cautiously
SCENARIO 1: CPI PRINTED AS EXPECTED
If the CPI is printed as expected or slightly lower, it means that the FED'S weapon to lower the inflation is working slowly slowly however the numbers would still be considerably high near 8% YOY which is way way above FED'S target. This would mean that the FED might continue to raise rates to lower the inflation but not that aggressively. Meaning the DXY would still be more attractive compared to other currency long term. So its still bullish
SCENARIO 2: CPI PRINTED HIGHER THAN EXPECTED
If the CPI prints a lot higher than expected lets say it becomes 8.3% or higher, then we could practically assume that the FED'S tool is not working and they would likely take a more aggressive stance . The market's reaction at this point of time would be to BUY the DXY which would make the DXY appreciate.
Of the above two scenarios, number 1 seems to be more likely and practical. Shall scenario 1 take place, we can expect the DXY to consolidate and give us a buying opportunity at a good price.
TECHNICAL ANALYSIS ON USDCAD LONG TRADE
Here we have USDCAD weekly chart, we can likely expect this pair to retrace lower which would give us an ideal entry before the major uptrend resumes. Kindly for the technical analysis have a look at the main chart.
Trade Safely & Cautiously
