This week’s inflation data out of the US has taken on a greater importance than it may have had previously after Friday’s Non-Farm Payroll print came in much stronger than expected, causing markets to more firmly price in a rate hike from the Fed before the end of the year and the dollar to jump higher. If Friday’s data is then compounded by strong inflation data this week, then expect the dollar to pick up momentum and push through to fresh highs for the year.
Wednesday’s CPI data will be the most heavily watched data release of the week with the market expecting the headline CPI data to show a 0.5% month-on-month increase and a lofty 4.2% year-on-year increase with the Core numbers coming in slightly lower with a 0.3% month-on-month increase and 2.9% year-on-year increase. Anything close to these expectations indicates still persistently high inflation and should see the recent uptrend in the dollar continue, whilst results further north should see the dollar smash through annual highs. A weaker print across the board could bring back some of the doves to the party and should see some sharp corrections to recent moves and push major pairs back into recent ranges.
Gold has been trading strongly on the dollar and US yields over the last few months and traders are expecting to see big moves if the data surprises either one way or the other. It hit multi-month lows on Friday after the jobs numbers and has since traded consistently under the 200 Day Moving Average for the first time this year. Another strong number on Wednesday should see if challenge close trendline support on the daily chart and then the annual low just under $4,100.00, whereas a weaker print should see it rally strongly back into recent ranges with that 200 Day line likely to provide initial resistance.
Resistance 2: $4,520.15 – Trendline Resistance
Resistance 1: $4,436.06 – 200 Day Moving Average
Support 1: $4,215.86 – Trendline Support
Support 2:$4,097.99 – 2026 Low
