The
US
Dollar
(USD)
is
easing
firmly
on
Thursday
after
the
US
Consumer
Price
Index
(CPI)
for
June
revealed
a
substantial
decline
in
inflation.
Special
remarks
for
the
retail
sales
which
shrank
even
by
0.1%,
meaning
that
US
consumer
is
no
longer
willing
to
pay
current
prices
for
goods
and
is
rather
awaiting
for
lower
prices
before
making
their
purchases.
Add
in
there
a
softer
print
for
housing
and
rent,
and
it
looks
like
the
Fed
measures
put
in
place
are
starting
to
pay
off.
On
the
economic
front,
most
important
data
for
this
Thursday
is
out
of
the
way,
and
focus
will
now
shift
towards
Friday
on
the
Producer
Price
Index
(PPI)
numbers
for
June.
Meanwhile
markets
will
want
to
hear
from
Fed
officials
that
these
numbers
are
what
they
are
looking
for,
and
should
trigger
a
more
dovish
response
from
the
Fed.
With
nearly
less
than
two
months
left,
the
initial
rate
cut
for
the
US
looks
to
be
locked
in
for
September.
The
US
Dollar
Index
(DXY)
faces
a
key
pivotal
moment
with
the
US
Consumer
Price
Index
release
for
June.
This
is
the
make-or-break
moment
for
September
rate
cut
prospects,
with
any
uptick
snapping
the
disinflationary
trajectory
that
would
mean
that
September
meeting
is
off
the
table.
So,
expect
markets
to
give
a
more
significant
probability
of
a
further
easing
of
the
DXY
than
a
stronger
US
Dollar.
On
the
upside,
the
55-day
Simple
Moving
Average
(SMA)
at
105.14
remains
the
first
resistance.
Should
that
level
be
reclaimed
again,
105.53
and
105.89
are
the
following
nearby
pivotal
levels.
The
red
descending
trend
line
in
the
chart
below
at
around
106.23
and
April’s
peak
at
106.52
could
come
into
play
should
the
Greenback
rally
substantially.
On
the
downside,
the
risk
of
a
nosedive
move
is
increasing,
with
only
the
double
support
at
104.81,
which
is
the
confluence
of
the
100-day
SMA
and
the
green
ascending
trend
line
from
December
2023,
still
in
place.
Should
that
double
layer
give
way,
the
200-day
SMA
at
104.41
is
the
gatekeeper
that
should
catch
the
DXY
and
avoid
further
declines.
Further
down,
the
correction
could
head
to
104.00
as
an
initial
stage.
US
Dollar
Index:
Daily
Chart
In
the
world
of
financial
jargon
the
two
widely
used
terms
“risk-on”
and
“risk
off”
refer
to
the
level
of
risk
that
investors
are
willing
to
stomach
during
the
period
referenced.
In
a
“risk-on”
market,
investors
are
optimistic
about
the
future
and
more
willing
to
buy
risky
assets.
In
a
“risk-off”
market
investors
start
to
‘play
it
safe’
because
they
are
worried
about
the
future,
and
therefore
buy
less
risky
assets
that
are
more
certain
of
bringing
a
return,
even
if
it
is
relatively
modest.
Typically,
during
periods
of
“risk-on”,
stock
markets
will
rise,
most
commodities
–
except
Gold
–
will
also
gain
in
value,
since
they
benefit
from
a
positive
growth
outlook.
The
currencies
of
nations
that
are
heavy
commodity
exporters
strengthen
because
of
increased
demand,
and
Cryptocurrencies
rise.
In
a
“risk-off”
market,
Bonds
go
up
–
especially
major
government
Bonds
–
Gold
shines,
and
safe-haven
currencies
such
as
the
Japanese
Yen,
Swiss
Franc
and
US
Dollar
all
benefit.
The
Australian
Dollar
(AUD),
the
Canadian
Dollar
(CAD),
the
New
Zealand
Dollar
(NZD)
and
minor
FX
like
the
Ruble
(RUB)
and
the
South
African
Rand
(ZAR),
all
tend
to
rise
in
markets
that
are
“risk-on”.
This
is
because
the
economies
of
these
currencies
are
heavily
reliant
on
commodity
exports
for
growth,
and
commodities
tend
to
rise
in
price
during
risk-on
periods.
This
is
because
investors
foresee
greater
demand
for
raw
materials
in
the
future
due
to
heightened
economic
activity.
The
major
currencies
that
tend
to
rise
during
periods
of
“risk-off”
are
the
US
Dollar
(USD),
the
Japanese
Yen
(JPY)
and
the
Swiss
Franc
(CHF).
The
US
Dollar,
because
it
is
the
world’s
reserve
currency,
and
because
in
times
of
crisis
investors
buy
US
government
debt,
which
is
seen
as
safe
because
the
largest
economy
in
the
world
is
unlikely
to
default.
The
Yen,
from
increased
demand
for
Japanese
government
bonds,
because
a
high
proportion
are
held
by
domestic
investors
who
are
unlikely
to
dump
them
–
even
in
a
crisis.
The
Swiss
Franc,
because
strict
Swiss
banking
laws
offer
investors
enhanced
capital
protection.
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