U.S. dollar bulls rushed in after the surprise U.S. inflation jump, showing the highest inflation since 2008, stirred the debate on how long the Federal Reserve can keep monetary policy ultra-loose. The CPI report topped all forecasts and traders saw the data as putting more pressure on the Fed. The greenback advanced sharply, pushing EUR/USD and GBP/USD towards lower targets.
Traders will now be scrutinizing the testimony from Fed Chair Jerome Powell tomorrow.
Dollar bulls have pushed the pair lower towards the descending trendline at around 1.1750, the lower barrier of a current downtrend channel. Whether this channel holds, remains to be seen. Falling below 1.1740 could increase bearish momentum towards 1.17 and 1.16. A current resistance is however seen at around 1.19.
DAX: There was nothing to gain for day traders on Tuesday as momentum came to a halt after the index reached a new high slightly above 15800. If the index remains above 15600, we could see an extension of gains towards 15900 and 16000.
Summer is in the markets and given a lower-liquidity backdrop across many markets during the summer months the potential for range-bound conditions is high. We therefore recommend traders staying on the sidelines during these low-liquidity periods, taking a break from the markets and adjusting risk exposure. The next major risk event will be later in the summer with the Jackson Hole Economic Symposium August 26-28.
We will take our annual summer trading break from August 2 to August 20 but will adjust risk exposure even in the month of July.
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