CPI Surpasses Expectations, Fed's Dovish Signals, and USD's Rollercoaster Ride

The YoY CPI exceeded expectations, reaching 3.7% compared to an anticipated 3.6% for August. Core CPI also rose unexpectedly, from 0.2% to 0.3%. Despite this, the annual core inflation rate remained stable at 4.3%.

Yields and the dollar are coming back to their bullish stance after some correction yesterday as the Fed may keep rates at this level for longer and maybe a last hike in November if inflationary pressures continue.

CME FedWatch Tool indicates a likely Fed interest rate range of 5.25% to 5.50% for September, suggesting growing expectations of a more dovish Fed stance. While a September rate hike is unlikely, there's a 40% chance of a 25-bps increase in November, indicating cautious investor sentiment toward potential future monetary tightening.

The US Dollar Index (DXY), which measures USD performance against major currencies, is retreating from recent gains, trading around 104.60. Investors are focusing on upcoming US economic data, including Core Producer Price Index (PPI) and August Retail Sales figures, which could influence market sentiment.

Gold is breaking the support around the 1910 level and the next target could be around the 1885 level. Today's data will help gold find direction.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1950	1942	1931	1910	1900	1885