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10.11.202213:54 Форекс анализи и прегледи: DXY: What will the latest inflation data say?

Today, the dollar continues to recover after a strong fall the day before, provoked by mixed data from the US labor market, published last week.

The dollar index (DXY) is growing today for the second day in a row while market participants are assessing the results of the midterm elections to the US Congress and are preparing for the publication of updated data on inflation in the US today. These can significantly affect the Fed and the dynamics of the dollar.

Economists assume that the annual CPI fell in October from 8.2% to 8.0% and the base CPI from 6.6% to 6.5%. If the data really indicate a slowdown in inflation, the Fed may begin to slow down the pace of tightening its policy, raising the interest rate in December by 0.50% and not by 0.75%, as before.

Exchange Rates 10.11.2022 analysis

It is noteworthy that New York Fed President John Williams recently said that long-term inflation expectations have stabilized at levels close to the target level.

At the same time, in monthly terms, CPI values may indicate an increase in inflation. It will probably be difficult to say how the market will react to this, given the annual slowdown in inflation. One way or another, the inflation rate remains four times higher than the Fed's target level, and this forces the heads of the US central bank to still adhere to a strict approach in determining the parameters of monetary policy.

Statistics on the number of applications for unemployment benefits will also be published today (at 13:30 GMT). The number of initial claims for benefits may increase slightly to 220,000 from 217,000 a week earlier. Although this is a minor change, it can negatively affect the dollar: the Fed has repeatedly linked monetary policy parameters with the state of the labor market in the country. The pace of monetary tightening may slow down if labor market indicators help.

Tomorrow, the US and Canada are celebrating national holidays, American banks and stock exchanges will be closed, and on the eve of the long weekend, strong movements may be observed in the market, provoked by the fixation of some of the trading positions of traders.

Considering all these, it is necessary to be prepared for just such a scenario of today's American trading session.

Exchange Rates 10.11.2022 analysis

Returning to the dynamics of the dollar index (reflected as CFD #USDX in the MT4 trading terminal), as of writing, DXY futures are trading near 110.46, still maintaining negative dynamics and moving in the lower part of the descending channel that was newly formed last month (on the DXY chart).

If today's publication of US inflation data disappoints investors, it will provoke a new wave of dollar sales and a drop in DXY towards 109.00.

In an alternative scenario, a breakout of the 111.00 round level will trigger a stronger movement of DXY upward.

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