Price and Chart Analysis for the US Dollar (DXY)
The key market indicator for this week will be Tuesday’s US inflation data.
After the recent burst of hawkish Fed talk and ahead of a much expected US inflation data, US Treasury rates have been steadily rising. The US dollar and a number of risk markets will be influenced by the speed and composition of this drop in the coming weeks, even if the CPI announcement is anticipated to show that price pressures are reducing in the US.
The yield on the 2-year US Treasury, which is sensitive to interest rates, is once again over 4.50% and at levels last seen in late November. As traders anticipate a more hawkish Fed in the coming months, the short-date has risen by almost 40 basis points since the dramatic post-NFP rate re-pricing.
Daily Chart of the US Treasury 10-Year Yield as of February 13, 2023
Prior to tomorrow’s inflation data, the current upward movement of the US dollar has stopped, but the technical setup indicates that this move may not yet be complete. A confirmed breach of 103.60 will make previous horizontal resistance around 104.30 the next level of interest, according to the bullish flag formation formed during the previous ten days, which often predicts a further move higher.