- The dollar created a new high since last Friday against a basket of six majors, underpinned by the rosy U.S. PPI release. Today, we will have U.S. CPI for November.
- The commodity-link currencies including Aussie dollar and the New Zealand dollar posted significantly more gains comparing to the EU currencies yesterday, with the former breaking above its H4-period trend resistance while the latter challenging its daily trend resistance.
The dollar created another new high since last Friday against a basket of six majors on Tuesday 12 December, thanks to the better-than-expected U.S. PPI release which came in at 3.1% YoY for November, a level not seen from January 2012. Meanwhile, the short-term corrective decline momentum in the index was building up after recent rally. Watch other inflation measures in U.S which are expected to rise, including CPI and the core CPI for November.
The dollar index (DXY) created another new high since last Friday before retreated. Given that its MACD could form a potential bearish divergence pattern on the 4 hour chart, indicating strong downside risks, it will be interesting to see whether or not the index could extend the corrective drop in the mode of consolidation ahead of CPI release tonight, with downside support to watch at 93.88-93.74 region.
（DXY H4 chart）
As to non-U.S. currencies, the euro retreated substantially to a new low after reacting resistances. However, the shared currency did not fall further as it staged a corrective rally again in late session. Therefore, the euro was still within its overall downtrend. The British pound inched lower after the extension of decline. The sterling still faces risk of breaking down below the daily trend support on the strong dollar although held above it for now. Only good news from Brexit could save the sterling. The Aussie dollar rallied substantially and broke above its H4-period descending line. Watch whether or not its short term moving averages could cross above its long term moving averages on the 4 hour chart.
（AUDUSD H4 chart）
Take a look at precious metals now. The gold reversed up in the form of V-shape after creating a new low in the short term. In addition, its MACD formed a strong bullish divergence pattern on the 4 hour chart. Its short term moving averages tended to converge while its long term moving averages remained bearish and divergent. Look for a corrective rally on the 4 hour chart. A stronger U.S. CPI release tonight could force the yellow metal to print a new low.
（Gold H4 chart）
By JasonZou —— Chief Analyst of AvaTrade China
Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.