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·         Dollar moves toward year's highs ahead of inflation test

 

The dollar was poised just below this year's high against the euro on Wednesday and it struck a five-week peak against the yen ahead of U.S. inflation data, with the prospect a strong number could pressure the Federal Reserve to wind back policy support.

The greenback has enjoyed a lift from last week's impressive U.S. jobs data and from remarks by Fed officials about tapering bond buying and, eventually, raising rates, sooner than policymakers elsewhere.

Six straight sessions of gains against the euro sent the common currency to its lowest since late March on Tuesday. At around $1.1718 through the Asia session, the year's low of $1.1704 is now within range. The dollar index , at 92.139, is at a three-week top and near its 2021 high of 93.439.

The inflation data may determine whether it tests those peaks, with a hot reading likely to stoke hike expectations and provide support, while downside surprise could reel those in.

The yen , which has dropped for five consecutive sessions against the dollar, fell marginally to 110.69 per dollar in early trade, its lowest since mid July. The dollar also touched a two-week high on sterling $1.3820 and held by a one-month high of 0.9234 Swiss francs .

The Chinese yuan touched a two-week low in offshore trade, before steadying onshore, while the South Korean won also made a two-week trough. .

A measure of consumer sentiment in Australia slid to a one-year low as lockdowns in major cities weighed, and the Australian dollar slipped a little.

The Australian dollar last bought $0.7338, while the New Zealand dollar sat at $0.7003.

Expectations the Reserve Bank of New Zealand will lift interest rates next week are keeping a floor under the kiwi.

 

 

 

·         EUR/USD defends 1.1700 after eight-day downtrend, focus on US inflation

EUR/USD defends the 1.1700 threshold, retreats from the day’s high of 1.1725, as bears take a breather amid a quiet session heading into the European hours on Wednesday. The major currency pair dropped for consecutive eights in the last before the recent consolidation ahead of the key US inflation numbers for July.

Technical analysis

A horizontal line comprising the 2021 trough, around 1.1700, questions the EUR/USD pair’s downside amid oversold RSI conditions. It should be noted, however, that the corrective pullback needs to cross the immediate horizontal hurdle surrounding 1.1760 to revisit the 1.1800 round figure. In a case wherein the quote drops below 1.1700, a 100-pip fall targeting the late 2020 lows close to 1.1600 can’t be ruled out.

 

Reference: Reuters