US Dollar gained ground as higher inflation could refrain the Fed from reducing interest rates in March. (Pivot Orderbook analysis)

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• US Dollar gained ground as higher inflation could refrain the Fed from reducing interest rates in March.
• Investors turned towards the Greenback as US yields rose to multi-week highs.
• Investors are now factoring in the possibility of a rate cut by the Fed in June.

The pair currently trades last at 104.84.

The previous day high was 104.96 while the previous day low was 103.97. The daily 38.2% Fib levels comes at 104.58, expected to provide support. Similarly, the daily 61.8% fib level is at 104.35, expected to provide support.

The US Dollar Index (DXY), a measure of the US Dollar’s strength against a basket of six major currencies, holds firm near three-month highs, trading around 104.80 during the Asian session on Wednesday. Concurrently, US yields are reaching multi-week highs across the yield curve.

There has been a significant shift in market sentiment, with expectations for an unchanged interest rate next month skyrocketing to 93%, marking a sharp contrast to just a month ago. Investors are now factoring in the possibility of a rate cut by the Federal Reserve (Fed) in June.

The unexpected upside surprise in US inflation for January has prompted analysts at Commerzbank to reassess the possibility of a pivot towards interest rate cuts by the Federal Reserve. There’s speculation among observers about whether the previously planned Fed’s interest rate cut for May could now face uncertainty.

Regarding the outlook for May, it’s prudent to wait for the data on Personal Consumption Expenditure (PCE) inflation for January and observe whether elevated price pressures persist into February before drawing conclusions about Fed policy adjustments.

The US headline Consumer Price Index (CPI) came in at 3.1% in January, surpassing the anticipated 2.9% but slightly lower than the previous rate of 3.4%. Month-over-month, US inflation rose by 0.3%, contrary to the expectation of maintaining the previous reading of 0.2%.

The US Core CPI (YoY) remained unchanged at 3.9%, defying market expectations of a decline to 3.7% in January. Additionally, US Core Inflation (MoM) increased by 0.4%, surpassing the expected unchanged reading of 0.3% for January.

Technical Levels: Supports and Resistances

EURUSD currently trading at 104.84 at the time of writing. Pair opened at 104.87 and is trading with a change of -0.03 % .

The pair remains strongly bullish on the daily timeframe. It trades above its 20 SMA @ 103.72, 50 SMA 102.95, 100 SMA @ 104.16 and 200 SMA @ 103.65.

The previous day high was 104.96 while the previous day low was 103.97. The daily 38.2% Fib levels comes at 104.58, expected to provide support. Similarly, the daily 61.8% fib level is at 104.35, expected to provide support.

Note the levels of interest below:

• Pivot support is noted at 104.24, 103.6, 103.24
• Pivot resistance is noted at 105.23, 105.59, 106.23

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