U.S. Dollar Is Losing Ground While Traders Start To Prepare For Inflation Reports

Key Insights

• U.S. dollar is moving lower as Treasury yields decline. 
• Currency markets may be choppy until Wednesday, when the U.S. releases inflation reports. 
• Until then, the U.S. Dollar Index may remain stuck in the 105.40 – 107 range. 

U.S. Dollar Is Under Pressure At The Start Of The Week

The U.S. dollar is losing ground against a basket of currencies at the start of the week as risk appetite continues to grow.

There are no important economic reports scheduled to be released today, so traders focus on the dynamics of Treasury markets. The yield of 10-year Treasuries has pulled back below the $2.80% level, which was bearish for the American currency.

Meanwhile, riskier assets like stocks were also in demand, which put additional pressure on the American currency.

At the same time, it’s too early to say that demand for safe-haven assets has collapsed. The price of gold is moving higher, while declining Treasury yields highlight the growing demand for the U.S. government bonds.

What’s Next For The U.S. Dollar?

This weeks, traders will be waiting for the important CPI and PPI reports from the U.S. These reports will have a major impact on the market’s evaluation of Fed’s next moves.

In this light, it remains to be seen whether the U.S. Dollar Index will be able to gain strong momentum on Monday or Tuesday. Currently, the U.S. Dollar Index is stuck between the resistance near the 107 level and the 50 EMA at 105.40. Most likely, it will need significant catalysts to move out of this range, and such catalysts may not be present until the U.S. releases inflation reports.

Meanwhile, traders will continue to monitor the dynamics of the U.S. government bond markets. From a big picture point of view, Treasury yields are trying to stabilize after the strong pullback in July. However, this stabilization may soon end as traders will react to U.S. inflation data.

For a look at all of today’s economic events, check out our economic calendar.