This week could be very interesting, especially after last week’s volatility in the currency markets. The US dollar saw strong gains following speculation and comments from the Fed indicating they are not in a hurry to cut rates. On Friday, the Nonfarm Payrolls report came in very strong, adding to the reasons why the Fed may not cut as much as firstly thought.
This week, the focus will be on inflation data, with some expecting inflation to start picking up again, particularly due to the Fed’s dovish policy actions. Crude oil, one of the key indicators for inflation, has recently bottomed and turned higher as well, suggesting that inflation could be stickier around current levels, rather than heading straight toward 2%.
In terms of wave counts, the sharp move in the Dollar Index looks impulsive, indicating we could see another push higher after retracement, especially if US CPI will come out hot. Its hard to see inflation coming back to 2% with CB easing, strong NFP, and higher crude.
US CPI vs Crude Oil
Dollar Index 4h Elliott Wave Count
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