The dollar moved higher in the US session (from the NY open). Helping the move was higher yields, and perhaps some anxiety about the CPI data which will be released tomorrow at 8;30 AM. The headline number is expected to rise 0.2% MoM/8.7% YoY. That is lower than the 1.3% and 9.1% last month. However, the core is expected to rise 0.5% MoM and 6.1% YoY for the core. The core is up from 5.9% last month.

Forex
The strongest to the weakest of the major currencies

So while one measure of the CPI will be lower, the core will be higher and moving further away from the 2.0% targets. This is what Fed officials warned of last week (that there was a long way to go to get back to 2%).

This week, my guess is Fed officials are on vacation as we have not heard peep from any of them this week at least on Monday and Tuesday (there were some comments over the weekend which were centered on keeping 75 basis points on the table).

With the Fed data dependent, the CPI is certainly a data point of significance even though Core PCE inflation is the so-called "favored" measure of inflation for the Fed. With the mixed potential of the data, it will be interested to see the market reaction to "as is" data.

For today, the tilt was to the upside.

EURUSD:. The EURUSD moved down in NY afternoon session and in the process revisited its 200 hour MA at 1.0204 and the 100 hour MA at 1.0199. Support held with the pair trading at 1.0214 near the close for the day, but the levels will remain as a key barometer in the new trading day.

USDJPY: The USDJPY extended a narrow 53 pip range at the start of the day into a 54 pip range at the end of the day(the 22 day average is 153 pips). The 100 hour MA on the downside (and moving higher) at 134.338 will be a key support target on the downside.. Stay above is more bullish. The 50% of the move down from the July 14 high at 134.88 did a good job of staying above for most of the NY session. It will be a close support in the new trading day.

GBPUSD: The GBPUSD tried to extend above the 100 hour MA and trend line near the same level (currently at 1.2109 and moving lower), but failed when headlines of the possibility of power cuts to homes and industries in January. That turned the GBPUSD back down - along with the technical disapointment from the failed break above the 100 hour MA and lower sloping trend line.

Meanwhile, there was some inflation related news today that gives some cause for pause.

  • Q2 labor costs increased at a 10.8% pace vs 9.5% expected. Needless to say, that is a worrisome figure.
  • Ford is hiking the cost of their F150 lightening by $8500. That is a healthy one-time increase. The EV and car inflation market is out of hand as are rents. I visited a car dealership this weekend to scope out plug in hybrids and EV vehicles. There is not a one in site.
  • China continues their live-fire around Taiwan in reaction to the Pelosi trip to the island nation last week. Blocking the shipping lanes is an issue for supply chain

On the positive side, the US CHIPs act was signed today by Pres. Biden. Plans for new fabrication plants by Micron and Intel in the US are in motion. However, the lead time to completion is still years away. Plus the mix of chips manufactured need to be right. PC chip demand is lower as businessed cut purchases. However, the car chips remain the elusive inventory item, which has become a cliche response to the automobile shortage (and higher prices for used and new cars).

For today, the higher dollar was also helped by higher rates. In the US debt market, the

  • 2 year rose to 3.27% up 5.8 bps
  • 5 year rose to 2.968%, up 5.7 bps
  • 10 year rose to 2.794%, up 3.3 bps
  • 30 year rose to 3.01%, up 2.6 bps.

In other markets:

  • Spot gold is trading up $5.70 or 0.32% at $1794.30.
  • Spot silver is trading down $0.12 -0.60% $20.54
  • WTI crude oil is trading near unchanged at $90.59
  • the price of bitcoin is trading at $23,140.82

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