U.S. Dollar Falls As Inflation Declines To 7.7%

Key Insights

• U.S. dollar is losing ground as traders rushed to buy riskier currencies after the release of U.S. inflation reports. 
• GBP/USD managed to settle above 1.1650.
• AUD/USD and NZD/USD gained ground amid a broad rally in commodity markets. 

U.S. Dollar Is In Free Fall After Inflation Reports

U.S. dollar found itself under significant pressure after the U.S. released inflation data for October. Inflation Rate declined from 8.2% in September to 7.7% in October, compared to analyst consensus of 8%. Core Inflation Rate declined from 6.6% to 6.3%.

Meanwhile, Initial Jobless Claims report indicated that 225,000 Americans filed for unemployment benefits in a week. This report had no impact on currency dynamics as traders focused on inflation data.

The yield of 2-year Treasuries declined towards 4.35%, while the yield of 10-year Treasuries settled below 3.90% as traders bet that the Fed would raise rates less aggressively.

The U.S. Dollar Index moved from 110.70 to 108.60 after the release of inflation data as traders rushed to buy riskier currencies.

EUR/USD Tries To Settle Above 1.0150

EUR/USD moved towards 1.0150 after the release of the U.S. inflation data. The U.S. data was the most important economic report of the week, and other catalysts would not be in play today.

Currently, EUR/USD is trying to settle above the resistance at 1.0150. In case this attempt is successful, EUR/USD will move towards the next resistance level at 1.0190. A successful test of this level will push EUR/USD towards the resistance at 1.0220.

On the support side, a move below 1.0150 will push EUR/USD towards the support at 1.0115. If EUR/USD declines below this level, it will head towards the next support at 1.0090.

GBP/USD Is Up By More Than 2.5%

GBP/USD gained strong upside momentum and moved towards the 1.1650 level. The potential shift in Fed’s policy is especially bullish for GBP/USD as the Bank of England will not be able to continue raising rates at a fast pace due to the problems of the UK economy.

In case GBP/USD manages to settle above the 1.1650 level, it will head towards the resistance at 1.1710.

AUD/USD Settled Above 0.6550 As Commodity Markets Rallied

AUD/USD moved above the 0.6550 level amid a strong rally in commodity markets.

Other commodity-related currencies have also enjoyed strong support today. NZD/USD is currently trying to settle above the psychologically important 0.6000 level. USD/CAD pulled back towards 1.3350.

It should be noted that the Canadian dollar has less support as it is more sensitive to the dynamics of oil prices, which are mostly flat in today’s trading session.

USD/JPY Is Under Strong Pressure

USD/JPY declined below the 142 level as traders rushed to buy the yen after the release of U.S. inflation data.

Traders who bet on a rebound from the 145.50 level have found themselves in an uncomfortable situation, and the current move looks like a major short squeeze for those who bet on the weakness of the Japanese currency.

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