Upbeat CPI Fuels Dollar’s Strength

● U.S. CPI beat market expectations, which fueled the dollar's upward movement.

● President Trump called President Putin to resolve the geopolitical tension in the Eastern European region and fuel market optimism.

● Focus on today's UK GDP to gauge the Pound Sterling price action that has been lacklustre lately.

Market Summary

Investors remained focused on the U.S. CPI data after Federal Reserve Chair Jerome Powell reinforced a hawkish outlook in his testimony on Tuesday, emphasizing the central bank's commitment to maintaining restrictive monetary policy amid strong economic performance. The dollar initially strengthened as inflation came in at 3%, prompting Powell to reiterate that the Fed still has work to do in curbing inflationary pressures.

However, the greenback later eased as market sentiment shifted toward geopolitical developments. Former President Donald Trump urged Russian President Vladimir Putin to negotiate an end to the Russia-Ukraine conflict, fueling optimism for a potential resolution. The prospect of de-escalation supported the euro and Pound Sterling, while oil prices erased early-week gains, sliding nearly 3% on reduced geopolitical risk.

Looking ahead, traders will turn their attention to the UK GDP report, which could influence the direction of the Pound Sterling amid its recent lack of momentum. Meanwhile, Bitcoin (BTC) and Ethereum (ETH) found support after hitting new weekly lows, staging a technical rebound in the previous session.

Market Movements

DOLLAR_INDX, H4

The release of crucial US Consumer Price Index (CPI) data kept markets on edge. According to the US Bureau of Labor Statistics, the annual CPI came in at 3.0%, surpassing economists' expectations of 2.9%. The dollar index initially surged following the hotter-than-expected CPI report but later retreated as investors engaged in profit-taking ahead of market uncertainties. This week, Trump approved 25% tariffs on steel and aluminum imports and hinted at reciprocal tariffs against key US trading partners, adding further uncertainty to the US economic outlook.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 43 suggesting the index might extend its losses since the RSI stays below the midline.

Resistance level: 108.40, 109.90

Support level: 107.35, 106.50

XAU/USD, H4

Gold prices held near record highs as traders balanced hot US inflation data against rising safe-haven demand amid escalating trade tensions. Initially, gold dipped following the CPI release, as traders priced in fewer Fed rate cuts. However, uncertainty surrounding Trump's aggressive tariff plans continued to fuel demand for the precious metal.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 61, suggesting the commodity might extend its gains since the RSI stays above the midline.

Resistance level: 2935.00, 2960.00

Support level: 2875.00, 2815.00

Nasdaq, H4:

The Nasdaq ended the session unchanged as mixed market signals kept US equities struggling for clear direction. On the bearish side, stronger-than-expected US CPI data pushed Treasury yields higher, pressuring the broader equity market. However, optimism surrounding tech sector growth and AI advancements provided a cushion, helping the Nasdaq hold steady despite broader market uncertainty.

Nasdaq is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI retreated from overbought territory, suggesting the index might tilt toward a more bearish front and extend its consolidation trend.

Resistance level: 21920.00, 22590.00

Support level: 21065.00, 20590.00

Crude Oil, H4

Crude oil prices fell slightly, pressured by a higher-than-expected US EIA inventory report. According to the Energy Information Administration (EIA), US crude oil inventories rose by 4.07M barrels, exceeding market expectations of 2.4M barrels, signaling weak demand. Meanwhile, Trump stated he would push for a ceasefire deal between Russia and Ukraine, potentially reducing supply disruptions and further pressuring oil prices.

Crude oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 33, suggesting the commodity might extend its losses since the RSI stays below the midline.

Resistance level: 73.30, 75.25

Support level: 70.40, 67.80