U.S. Dollar Remains Under Pressure As PPI Report Misses Expectations

Key Insights

• The surprising PPI data put additional pressure on the American currency. 
• GBP/USD gained strong upside momentum and made an attempt to settle above the 1.2000 level. 
• USD/JPY tested new lows at 137.65.

U.S. Dollar Tested Multi-Month Lows

U.S. Dollar Index tested new lows near 105.35 after U.S. reported that PPI declined from 8.4% in September to 8% in October, compared to analyst consensus of 8.3%. Core PPI decreased from 7.1% to 6.7%.

The surprising decline in Producer Prices is bearish for the U.S. dollar as it shows that inflation has started to cool down. At this point, the market is pricing in a 50 bps rate hike at the next Fed meeting.

EUR/USD Gained Ground As Euro Area Economic Sentiment Improved

EUR/USD continued its rebound today, supported by the better-than-expected Euro Area ZEW Economic Sentiment Index report.

The report indicated that Euro Area Economic Sentiment improved from -59.7 in October to -38.7 in November, compared to analyst forecast of -57.2. Lower natural gas prices served as the key catalyst for the move.

It remains to be seen whether this improvement will be sustainable as natural gas prices have started to move higher ahead of the winter. Meanwhile, EUR/USD settled near the 1.0400 level.

GBP/USD Tested The Key 1.2000 Level

GBP/USD has recently made an attempt to settle above the psychologically important 1.2000 level. Today, UK reported that the number of people claiming for unemployment benefits increased by 3,300. Unemployment Rate increased from 3.5% in August to 3.6% in September. Tomorrow’s inflation data should have a bigger impact on the pound. Meanwhile, market participants stay bullish on GBP/USD.

GBP/USD needs to stay above the 1.1900 level to have a chance to gain upside momentum in the near term. The next resistance level for GBP/USD is located at 1.1925. If GBP/USD settles above this level, it will head towards the next resistance at 1.1960.

On the support side, a move below 1.1900 will push GBP/USD towards the support at 1.1855. If GBP/USD declines below this level, it will head towards the support at 1.1830.

AUD/USD Continues To Rebound

AUD/USD made an attempt to settle above the 0.6800 level but lost momentum and pulled back towards 0.6730.

Meanwhile, NZD/USD settled near the 0.6150 level. USD/CAD continued its attempts to settle below 1.3300.

Commodity-related currencies stay strong as traders prepare for a less hawkish Fed. It looks that too many traders bet on the weakness of commodity-related currencies, and the recent strong rebound was caused by a short squeeze.

USD/JPY Rebounded Above The 139 Level

USD/JPY tested new lows at 137.65 after the release of U.S. PPI data. However, USD/JPY bulls used the sell-off as an opportunity to establish long positions, and USD/JPY moved back above the 139 level.

In case USD/JPY manages to settle above 139, it will gain additional upside momentum and move towards the psychologically important 140 level.

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