U.S. Dollar (DXY) Gains Ground After Inflation Reports

Key Insights

• U.S. dollar tested new highs after the release of U.S. inflation reports. 
• GBP/USD rebounded as UK government may be ready to reverse its tax cut plans. 
• USD/JPY continues to move towards the 150 level. 

U.S. Dollar Gains More Ground As Inflation Exceeds Expectations

U.S. dollar tested new highs after the release of inflation reports but lost momentum and pulled back as traders decided to take some profits off the table after the strong rally.

Today, the U.S. released inflation reports, which indicated that Inflation Rate declined from 8.3% in August to 8.2% in September, compared to analyst consensus of 8.1%.

The reports were bullish for the U.S. dollar, and the American currency has a good chance to gain additional upside momentum after a minor pullback from recent highs.

EUR/USD Rebounds From 0.9630

EUR/USD received support near 0.9630 and rebounded towards 0.9680.

The nearest resistance level for EUR/USD is located at 0.9725. In case EUR/USD settles back above this level, it will head towards the next resistance at 0.9750. A move above 0.9750 will push EUR/USD towards the resistance, which is located near the 20 EMA at 0.9810.

On the support side, the nearest support level for EUR/USD is located at 0.9670. If EUR/USD settles back below this level, it will move towards the support at 0.9635. A successful test of the support at 0.9635 will open the way to the test of the support at 0.9575.

GBP/USD Rallies On Hopes Of Policy Changes

GBP/USD gained upside momentum and made an attempt to settle above 1.1300 amid hopes that the UK government will reverse its policy on tax cuts.

While GBP/USD failed to settle above 1.1300 and pulled back towards the 1.1200 level, the pound maintained healthy gains against the U.S. dollar.

Most likely, GBP/USD will remain extremely sensitive to political rumors in the upcoming trading sessions.

AUD/USD Remains Under Strong Pressure

AUD/USD tested new lows at 0.6170 amid a broad pullback in commodity markets. NZD/USD touched lows near 0.5510 before rebounding towards the 0.5550 level.

Meanwhile, USD/CAD made an attempt to settle above 1.3975 before pulling back towards the 1.3900 level.

Commodity-related currencies will likely remain under pressure as markets believe that an aggressive Fed may push the world economy into a recession.

USD/JPY Tests New Highs

USD/JPY tested new highs at 147.67 after the release of U.S. inflation reports. There are no signs of interventions from the BoJ, so USD/JPY continues to move towards the 150 level.

Fundamentally, the yen should remain under pressure as the BoJ is extremely dovish and does not want to raise rates.

For a look at all of today’s economic events, check out our economic calendar.