U.S. Dollar (DXY) Pulls Back After Yesterday’s Strong Rally

Key Insights

• U.S. Dollar moved lower amid profit-taking after the huge rally. 
• GBP/USD found support below the 1.1500 level and rebounded towards 1.1550.
• USD/JPY found itself under pressure amid reports about potential interventions from the Bank of Japan. 

U.S. Dollar Is Losing Ground As Traders Take Some Profits Off The Table

U.S. Dollar Index declined towards the 109.50 level after yesterday’s huge rally. Today, traders had a chance to take a look at Producer Prices reports from the U.S. The reports indicated that PPI declined by 0.1% month-over-month in August, in line with the analyst consensus. Core PPI increased by 0.4% month-over-month, while analysts expected that it would grow by 0.3%.

Traders showed little reaction to the report as markets remained focused on yesterday’s inflation data. The FedWatch Tool indicates that there is a 28% probability of a 100 bps rate hike at the next Fed meeting. Treasury yields keep moving higher, and the yield of 2-year Treasuries is trying to settle above the 3.80% level. In case this attempt is successful, the American currency may get more support.

EUR/USD Faced Resistance At 1.0000

EUR/USD has recently made an attempt to settle back above the 1.0000 level but lost momentum and pulled back towards 0.9980.

Today, EUR/USD traders had a chance to take a look at the Euro Area Industrial Production report for July. The report indicated that Euro Area Industrial Production declined by 2.3% month-over-month, compared to analyst consensus of -1%.

Most likely, Euro Area Industrial Production will remain under significant pressure in the upcoming months due to the energy crisis.

GBP/USD Rebounds After Yesterday’s Sell-Off

GBP/USD found support below 1.1500 and moved back towards the 1.1550 level as traders rushed to buy the pound after yesterday’s sell-off.

UK has recently reported that Inflation Rate declined from 10.1% in July to 9.9% in August, compared to analyst consensus of 10.2%. Core Inflation Rate increased from 6.2% to 6.3%, in line with the analyst consensus.

GBP/USD is currently trying to stay above the 1.1550 level. In case this attempt is successful, GBP/USD will head towards the next resistance level, which is located at 1.1590. A successful test of this level will push GBP/USD towards the resistance at 1.1625. In case GBP/USD gets above 1.1625, it will head towards the 20 EMA at 1.1650.

On the support side, a move below 1.1550 will open the way to the test of the support at 1.1500. If GBP/USD declines below this level, it will head towards the next support level at the recent lows at 1.1480.

Commodity-Related Currencies Are Mostly Flat In Today’s Trading

The rebound in some commodity markets failed to provide enough support to commodity-related currencies, which are trading near yesterday’s levels.

AUD/USD is stuck near 0.6730, while NZD/USD is trading near the 0.6000 level. USD/CAD has recently made an attempt to settle above the resistance at 1.3200 but failed to develop sufficient upside momentum and pulled back towards 1.3170.

USD/JPY Declines As Bulls Fear That BoJ May Intervene

USD/JPY declined below the 143 level as reports indicated that the Bank of Japan conducted a rate check, which means that it could be ready for interventions.

Potential interventions from the BoJ remain the only positive catalyst for the yen. Without such interventions, USD/JPY will quickly move back towards the 145 level as BoJ remains extremely dovish.

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