Trading in the foreign exchange markets is calm today, with no major economic reports from the US or Canada. However, next week we can expect important updates on US CPI, PPI, Import Prices, and Retail Sales, which could affect the market. The USD is showing mixed signals and is slightly stronger, partly due to recent price reports. Even though July’s US inflation is expected to rise, there is still pressure on the Federal Reserve to lower rates.

Swap Market Dynamics

The swap market indicates that there is a likelihood of easing, with 21/22 basis points priced in for the September FOMC meeting. The Jackson Hole event next week may grab market attention as it usually discusses labor markets. Historically, this event has been used to announce significant policy changes. Chair Powell previously made an announcement at Jackson Hole that led the Fed to cut rates by 50 basis points. The DXY index shows intraday support at 98.05 and resistance at 98.40, suggesting a balanced trading session. Technically, the overall outlook for the index remains bearish. While the markets are quiet, we are preparing for key US economic reports this week. The updates on inflation and retail sales will help clarify the economy’s trajectory, likely causing noticeable price movements soon.

Retail Sales and Inflation Data

The US dollar is holding steady after the latest inflation report revealed core CPI cooled to 2.8%, still above the Fed’s target. However, retail sales data was weaker than expected, increasing pressure on the Fed to consider easing policy later this year. The swaps market now reflects about a 50% chance of a rate cut before 2025 ends. This situation feels reminiscent of the late 2010s when we also awaited guidance from the Fed amid mixed economic signals. All attention is now on next week’s Jackson Hole symposium for possible hints from the central bank. In the past, major policy announcements at this event significantly impacted the markets. For derivative traders, the current uncertainty surrounding the data and Jackson Hole means volatility is relatively cheap. Buying options could be a good strategy to prepare for a potential price spike, regardless of the direction. A movement in major currency pairs, like EUR/USD, seems likely after this quiet time. The Dollar Index (DXY) is currently around 104.50, with support near 104.00. Resistance is around 105.20, indicating a range that could break after this week’s news. The broader technical outlook for the dollar is uncertain, but we need a trigger for the next significant move. Create your live VT Markets account and start trading now.

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