The US Dollar jumps in the green just seconds after the US CPI print.

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• The US Dollar jumps in the green just seconds after the US CPI print.
• Traders that betted on quick rate cuts are left behind under the current tight inflation conditions.
• The US Dollar Index jumps further away from 102 and heads towards 103.

The US Dollar (USD) survives yet another day after pressure was building throughout the week for it do snap the 102 level to the downside in the US Dollar Index (DXY). Bets were placed in favor of further and quicker disinflation numbers, putting pressure on the Greenback to weaken. This inflation print confirms the US Federal Reserve’s stance, warnings and rightfull assessment to keep rates steady for now and await further data before issuing rate cuts.

Additionally, traders had the Jobless Claims numbers as well to assess. While disinflation nearly came to a stand still, the labor market seems to be remaning very tight. While expectetions were for Initial Jobless Claims to jump, they remained unchanged.

Even when taking the previous revised number into account for the Initial Jobless Claims, there is even a decline.

The US Dollar proved to be a textbook example of ‘buy the rumour, sell the fact’. Expectations were too high and too elevated that the US disinflation would pick up speed and sink further. With big bets placed on quick cuts in early 2024, those bets need to be unwinded, resulting in favor of the Greenback and US rates overall, while equities fall in disfavor for now.

The first level on the upside to watch is 103.00, which falls nearly in line with the trend line from the top of October 3 and December 8. If broken and closed above, the 200-day Simple Moving Average (SMA) at 103.43 comes into play. The 104.00 level might be too far off, with 103.78 (55-day SMA) coming in as the next resistance.

To the downside, a rejection by the descending trendline will give fuel to Greenback bears leading to a further downturn. The line in the sand here is 101.74, the floor which held halfway through December before breaking down in the last two weeks. In case the DXY snaps this level, expect to see a test at the low near 100.80.

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