The US dollar index is testing the 101.00 support level. Investors are waiting for the US inflation data, which may directly affect further actions of the US regulator. The CPI is expected to fall from 4% to 3.1% year on year. If expectations are confirmed, this could convince the Federal Reserve officials to maintain a pause in tightening after the July meeting. The dollar wasn’t supported even by the tough rhetoric of the Fed representative Mary Daly, who noted that the rate should be raised twice more. As traders prepare for the Fed to announce the end of the current tightening cycle soon, the dollar’s decline could continue.
SELL STOP 101.00/TP 100.40/SL 101.20
USD/CAD
The USD/CAD pair is consolidating around 1.3200. The Bank of Canada’s monetary policy meeting will take place today: analysts are confident that the rate will be raised by 25 basis points to 5% amid high inflation and a strong labor market. The June report on the Canadian labor market showed that 60 thousand new jobs were created in Canada last month against the forecast of 20 thousand. Another factor that may keep Canada’s inflation high is wage growth. Now it stands at 4.2%, far from the target level of 2%. Thus, the Bank of Canada will have to continue to raise the rate, which will support the national currency.
SELL STOP 1.3190/TP 1.3100/SL 1.3220
GBP/USD
The GBP/USD pair is approaching the 1.30 resistance. The pound was supported by the latest data on the UK labor market, which confirmed a significant increase in wages in annual terms. The growth of wages will stimulate the growth of consumer activity and inflation, which may cause a further increase in the rate by the Bank of England. Yesterday, the IMF supported the regulator’s latest aggressive tightening action, noting that another 50 basis point rate hike may be needed from the Bank of England to stabilize inflation, bringing the rate to 6%. Given the above, we recommend holding long positions on the GBP/USD pair.
BUY STOP 1.2980/TP 1.3050/SL 1.2960
