US Dollar re-test 90.00 and above on US CPI

• US CPI came in stronger.
• US retail sales missed consensus.
• DXY gyrates around 90.00.

The US Dollar Index (DXY) has recovered the smile on Wednesday, advancing to fresh daily highs beyond the psychological 90.00 handle and looking to consolidate around those levels.

US Dollar bid after data

The index leapt to fresh peaks above 90.00 the figure on Wednesday after US inflation figures showed headline consumer prices rising 2.1% on a year to January and 0.5% inter-month. Additionally, core CPI rose at an annualized 1.8% and 0.3% on a monthly basis, all prints coming in above expectations.

Furthermore from the US docket, retail sales unexpectedly contracted 0.3% during last month, while core sales came in flat, missing initial estimates.

USD rose in tandem with yields of the US 10-year benchmark, which rebounded to the 2.88% neighbourhood soon after today’s releases.

Adding to USD-strength, Fed Funds Futures now imply investors see the likelihood of 4 rate hikes this year at 23%, as per CME Group’s FedWatch tool. The sudden up move in DXY re-ignited fears of another potential sell-off in the risk-associated space, as seen earlier in the month.

US Dollar relevant levels

As of writing the index is gaining 0.16% at 89.89 and a break above 90.57 (high Feb.8) would target 90.70 (high Jan.22) en route to 90.98 (high Jan.18). On the downside, the next support is located at 88.55 (low Feb.2) seconded by 88.42 (2018 low Jan.25) and finally 86.85 (weekly trend line off 72.70).