U.S. Dollar Soars As Inflation Rate Jumps to 3.7%: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Tests Yearly Highs After Inflation Data

U.S. Dollar Index rallied as traders focused on inflation data. Inflation Rate increased from 3.4% in August to 3.7% in September, compared to analyst forecast of 3.6%. Core Inflation Rate grew from 2.4% to 2.6%, compared to analyst consensus of 2.5%. The reports indicated that high energy prices have started to push prices of other goods and services higher.

FedWatch Tool indicates that the probability of a rate hike at the next Fed meeting has increased to 37.1%. Interestingly, traders believe that Fed will keep rates unchanged in October despite rising inflation.

Treasury yields gained ground as bond traders sold bonds after the release of inflation data. The yield of 2-year Treasuries moved towards the 4.85% level, while the yield of 10-year Treasuries settled near 5.24%. Rising yields provided additional support to the American currency.

U.S. Dollar index climbed above the resistance at 102.35 – 102.50 and is trying to settle above the 102.80 level. In case this attempt is successful, U.S. Dollar Index will head towards the resistance at 103.15 – 103.30.

Global Markets Fall as Hot CPI Fuels Fed Rate Hike Fears

EUR/USD Is Under Strong Pressure

EUR/USD tested new lows as traders focused on inflation data from the U.S. In the EU, traders had a chance to take a look at the Wholesale Prices report from Germany. The report showed that Wholesale Prices increased by +1.9% month-over-month in September, compared to analyst consensus of +0.7%.

EUR/USD pulled back below the support level at 1.1175 – 1.1190 and is trying to settle below the 1.1120 level. If EUR/USD manages to settle below 1.1120, it will head towards the next support, which is located in the 1.1075 – 1.1090 range.

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GBP/USD Tests Support At 1.3150 – 1.3165

GBP/USD is under pressure as traders focus on Fed policy outlook. While the market does not expect that Fed will raise rates in October, traders prepare for rate hikes in December and January.

GBP/USD attempts to settle below the support level at 1.3150 – 1.3165. If GBP/USD manages to settle below the 1.3150 level, it will head towards the next support at 1.3030 – 1.3050. RSI remains in the moderate territory, so there is plenty of room to gain momentum in the near term.

USD/CAD Tests New Highs

USD/CAD gained ground as traders reacted to the sell-off in precious metals markets. Gold is down by -1.9%, while silver pulled back by -6%. Other commodity-related currencies are also losing ground in todays trading session.

If USD/CAD stays above the resistance at 1.4235 – 1.4250, it will head towards the 1.4300 level. A move above 1.4300 will open the way to the test of the resistance level at 1.4350 – 1.4365.

USD/JPY Gains Ground Amid Rising Treasury Yields

USD/JPY is moving higher as traders focus on rising Treasury yields. However, traders are not ready for big moves amid fears about potential interventions from the Bank of Japan.

In case USD/JPY climbs above the 159.00 level, it will head towards the psychologically important 160.00 level. In this scenario, intervention risks will increase, although it remains to be seen whether BoJ would be ready to provide support to the yen.