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June 6, 2022

Why USD Could Soar Before This Friday

Frank Cabibi

USD is stronger today as economists expect hotter inflation than last month's report. The dollar index is up 15 cents at the time of writing this. Here is what we think will happen before CPI news this Friday, followed by a couple USD pair setups.

What To Expect

USD
https://www.forexfactory.com/calendar?week=jun5.2022

With what we have now, it looks like the dollar will remain strong. Last week, the US reported better-than-expected NFP numbers which more than likely supports the Fed's already-aggressive stance of keeping higher interest rates. To fuel this policy even more, inflation is still a major concern in the US, and Friday's CPI data is expected to more than double last month's rise. Investors are expecting the Fed will stay the course due to these issues.

A considerable number of open contracts were bought last week according to COT, but the number of long and short positions nearly matched each other. Still, the overall amount of long positions quadruples the total shorts on these contracts, so institutions are clearly long.

USD Trade Setups

USD/CHF

USD

The pair just crossed over the 50% level with some bullish upside while testing a double top in the 0.964s. The pair has some room to run if it can break above the current resistance level on the 4H timeframe. The 0.976s looks like a realistic level to test before things may turn the other way.

EUR/USD

USD

EU caught some resistance on the 1D after price rose to a falling trend line and a previous bottom. The lower highs and bearish pressure on the most recent candle suggests more weakness in the euro than originally anticipated. Price may try to come down to the 1.03s to test another bottom for support.

USD/JPY

USD

UJ flies above significant resistance on the 1D timeframe after breaking out of a flag pattern several days ago. A close above this level looks promising for the pair and would be increasingly bullish for those long USD. The 131s could also be serving as a new support zone should price retrace.

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