US headline PPI blows away estimates

Headline US PPI for January was 9.7% YoY vs 9.1% YoY expected. The December print was revised higher for December from 9.7% YoY to 9.8% YoY. The core PPI for January, which excludes the volatile food and energy components, rose 8.3% YoY vs 7.9% YoY expected and 8.3% YoY in December. Both prints were much higher than expected, as inflation data continues to soar. Recall that CPI data for January released last week was also higher than expected, at 7.5% YoY vs 7.3% YoY expected and 7% YoY in December. St Louis Fed President Bullard has been on the wires over the past few days discussing how the favors an increase in key interest rates by 100 bps by July, which would imply either a 50bps hike at a meeting prior to that date or an inter-meeting hike. He also said the he favors frontloading quantitative tightening in order to end accommodation. The PPI data for January helps to reinforce Bullard’s stance.

What is inflation?

The US Dollar Index (DXY) has been moving higher in an upward sloping channel since May 2021. In late November, the DXY made a false breakout above the channel, and moved back inside. Often as we see, when there is a false breakout on one side of a channel, price moves to retest the opposite side of the channel. The bottom trendline of the channel was tested on January 13^th, and the US Dollar Index has been trading within the upward sloping channel since.

Source: Tradingview, Stone X

Trade DXY now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a 240-minute chart, DXY has been trading in a symmetrical triangle since the beginning of the year between 94.57 and 97.44. More recently, price moved to the 50% retracement level from the highs on January 28^th to the lows on February 4^th, near 96.29. Resistance is just above at the February 14^th highs of 96.43, which is also the downward sloping trendline of the triangle. Above there is the 61.8% Fibonacci retracement level from the same timeframe, and then horizontal resistance at 96.98. The January 28^th highs cross above at 97.44. Support is near today’s lows and the 50 Day Moving Average at 96.00 (see daily), then horizontal support and the upward sloping trendline of the long-term channel (see green line on daily) near 95.71. Below there is the bottom trendline of the channel near 95.35, then the lows of February 4^th at 95.13.

Source: Tradingview, Stone X

The US PPI was much stronger than expected. St Louis Fed President Bullard has made his hawkish stance known and is looking for a 50bps hike soon, and 100bps buy July 1^st. if other Fed members agree with his position that a 50bps hike is needed soon, the DXY could be making new near-term highs sooner rather than later!

Learn more about forex trading opportunities.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.