Dollar Steadies Ahead of Key US Inflation Data, Yen Dips Amid Holiday-Thinned Trading (08.12.2024)

The dollar stabilized around 103.1 as markets await crucial US inflation data this week, which is expected to provide insights into the Federal Reserve's next moves. The yen dipped toward 147 per dollar in light trading due to a Japanese holiday, while gold prices eased below $2,430 per ounce as investors anticipate the upcoming inflation reports. Meanwhile, the GBP/USD pair tests support at 1.2720, with key levels in focus if breached. Dive into our detailed analysis to understand these market dynamics.

Dollar Stabilizes Ahead of Key US Inflation Data After Recent Volatility

On Monday, the dollar index held steady around 103.1 as investors awaited key inflation data this week to confirm that price growth continues to stabilize. The US producer inflation data is due on Tuesday, with consumer inflation figures following on Wednesday. Additionally, US retail sales data will be released on Thursday. Last week, the dollar dropped to a seven-month low following a disappointing July jobs report, which raised concerns about a potential US recession and led to speculation about an emergency Federal Reserve rate cut. However, sentiment has since stabilized as subsequent US economic data eased recession fears, allowing the dollar to recover much of its previous losses. Although expectations for Fed rate cuts have been dialed back, markets still anticipate over 100 basis points of total easing this year.

In the EUR/USD pair, which has been trading sideways last week, the first support level is at 1.0900. If this level is breached, the next supports to watch will be 1.0850 and 1.0800. On the upside, the first resistance is at 1.0960; if this level is surpassed, the next targets will be 1.1000 and 1.1050.

Yen Dips Towards 147 Per Dollar Amid Holiday-Thinned Trading

On Monday, the Japanese yen dipped towards 147 per dollar, with trading volumes expected to stay low due to a Japanese holiday. The yen also approached a one-week low as the dollar gained strength following surprising US economic data, which led traders to reduce their expectations for Federal Reserve interest rate cuts. Last week, the yen had risen to a seven-month high against the dollar after a hawkish shift by the Bank of Japan prompted a swift loosing of yen carry trades, driven by US recession concerns and speculation of more significant Fed rate cuts. However, sentiment has since stabilized. BOJ Deputy Governor Shinichi Uchida noted that the central bank is unlikely to raise rates amid market instability. Additionally, the BOJ's July policy meeting summary revealed that some members advocated for continued rate hikes, with one suggesting that rates should eventually reach at least 1%.

The first resistance level is at 148.00. If this level is surpassed, the next targets will be 149.30 and 150.90. On the downside, the initial support is at 145.60; if this level is breached, the next support levels to watch will be 144.00 and 141.70.

Gold Slips Below $2,430; Eyes on Fed Rate Cut Speculations

Gold prices fell below $2,430 per ounce on Monday as investors awaited key US inflation data this week for insights into the Federal Reserve's future monetary policy. Expectations for a Fed rate cut in September remain, supported by recent comments from Fed officials suggesting that inflation might be easing enough to justify a rate reduction next month. However, market opinions have become mixed following positive US job data last week, which eased fears that a weakening labor market could signal a recession. Despite this, gold’s appeal as a safe-haven asset persisted due to ongoing geopolitical tensions, including reports of another Israeli airstrike on Gaza and Moscow's promise of a 'tough response' to Ukraine's actions. The US producer inflation data is set to be released on Tuesday, with consumer inflation figures following on Wednesday.

In gold, the first support level is at 2,425. If this level is breached, the next supports to watch will be 2,390 and 2,375. On the upside, the initial resistance is at 2,436; if this level is surpassed, the next targets will be 2,450 and 2,500.

GBP/USD Faces Initial Support at 1.2720, Eyes 1.2650 if Breached

For GBP/USD, the initial support is 1.2720, followed by 1.2650 and 1.260, respectively. On the upside, the first resistance is at 1.2730, with subsequent levels at 1.2830 and 1.2870 if the pair breaks above this resistance.