Stability of US Dollar, GBP/USD, and EUR/USD in Uncertainty

Explore the stability of the US Dollar, GBP/USD, and EUR/USD amid market uncertainty trends ahead of the influential US CPI release.

In the ever-changing landscape of global currencies, the US dollar (DXY) has maintained its stability, leaving the GBP/USD and EUR/USD pairs in suspense as traders eagerly anticipate the upcoming US Consumer Price Index (CPI) data.

In the opening trade on Wednesday, the US dollar exhibited minimal movement, creating a sense of uncertainty among currency pairs. The US dollar index, reflecting recent upward momentum, is in a consolidation phase. The absence of clear guidance from the rates market suggests that this trend will likely persist until the release of the latest US inflation report on Thursday at 13:30 UK time.

Financial markets are currently factoring in 150 basis points of US interest rate cuts for the year, with the initial 25 basis point move anticipated at the March 20th Federal Open Market Committee (FOMC) meeting.

A closer textual analysis of the US dollar index reveals a short-term consolidation phase, with the greenback constrained by last Friday’s jobs report candle. The daily perspective presents a conflicting picture, with the 20-day simple moving average (SMA) supporting the dollar index. At the same time, the 50-/200-day SMA combination hints at a potential negative ‘death cross’ in the coming days. The dollar index is also positioned at the 61.8% Fibonacci retracement of the mid-July to early-October movement. This is accompanied by the Commodity Channel Index (CCI) indicator, which points higher but remains in neutral territory.

Stability of US Dollar, GBP/USD, and EUR/USD in Uncertainty

Meanwhile, GBP/USD maintains its recent gains and remains close to achieving a fresh multi-month high at 1.2828. The 20-day SMA attempts to provide support, and the current bullish ‘golden cross’ between the 50-/200-day moving averages adds a positive tone. The CCI indicator is currently neutral. Initial support is identified at 1.2667, followed by the 38.2% Fibonacci retracement level at 1.2630. A breakthrough above 1.2828 would set 1.3000 as the next target.

Retail trader data from IG reveals that 50.30% of traders are net-long, with a long-to-short ratio of 1.01 to 1. The number of net-long traders has increased by 16.90% compared to yesterday but is 11.84% lower than last week. On the flip side, net-short traders are 12.70% lower than yesterday but 20.19% higher than last week. Traditionally, a contrarian view of crowd sentiment suggests that GBP/USD prices may continue to fall.

In a mixed sentiment for GBP/USD clients, 52% are net short, with daily changes indicating an 11% increase in long positions, a 6% decrease in shorts, and a 2% change in open interest. Weekly changes reveal a 12% shift in longs, a 22% increase in shorts, and a 3% change in open interest.

Turning attention to the EUR/USD textual analysis, the spot price currently resides between the 20- and 50-/200-day moving averages. Last week, a ‘golden cross’ supported GBP/USD, while the CCI indicator stayed in neutral territory, identifying initial support at 1.0900.

As the market awaits the crucial US CPI data, traders closely monitor these currency pairs, anticipating the catalyst that could determine the direction of the next significant move.

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