After the release of inflation data, the US dollar rebounded moderately

The US dollar, measured by the US dollar index (DXY), experienced a mild rebound on Wednesday after the release of mixed US inflation data. Related reading: Data review: US CPI continued to rebound in August, but is it not bad news?

Data shows that after the quarterly adjustment in August, the CPI increased by 0.6% month on month and 3.7% year-on-year (previous value of 3.2%), higher than the market's consensus expectation of 3.6%. At the same time, core indicators (usually reflecting long-term economic trends) increased by 0.3% month on month and 4.3% year-on-year, which is closer to Wall Street's expectations.

This data has had little impact on the market's bets on the September decision of the Federal Open Market Committee (FOMC), and most investors still believe that the Federal Reserve (Fed) will choose to remain silent in September. Regarding the November meeting, the initial response from the swap market suggests that there is a high possibility that the Federal Reserve will raise interest rates by 25 basis points. However, over time, this probability has decreased again, highlighting investors' indecisive attitude.

Federal Reserve interest rate outlook forecast

Given the constantly changing interest rate expectations and the high sensitivity of the Federal Reserve to new information, it is important to continue to monitor the financial calendar as upcoming economic data may affect policymakers and the path of monetary policy.

In this context, three key reports - retail sales (terror data), wholesale sales inflation data, and consumer confidence index reports - are expected to provide valuable insights into the broader economic situation in the United States and lay the groundwork for the upcoming trend of the US dollar against the pound and Australian dollar (also known as the AUD). The author suggests that investors remain vigilant about these risk events.

Analysis of the Trend of GBP/USD

Since mid July, the pound/dollar has experienced a significant decline, but has now stabilized above the 200-day Simple Moving Average (SMA), which is 1.2450. At present, the GBP/USD bulls are struggling to defend this technical support, which may suggest that the worst moment for the pound may have passed.

If the SMA continues to remain stable in the next few days, then this will provide the clearest guidance for the pound/dollar to have bottomed out and the recovery is expected to start soon. Based on this, the GBP/USD is expected to rise to the 1.2550 line in the future, and if it breaks, it is expected to re explore the trend line resistance, which is around 1.2600. If it continues to rise, the focus will shift to the 1.2685 line.

On the contrary, if the pound/dollar falls below the 1.2450 line, such a breakthrough would be an ominous sign for the pound, highlighting the downward pressure on the pound/dollar and leaving the possibility for the exchange rate to fall towards the 1.2311 line. The 1.2311 first line is a key support constructed by the 61.8% Fibo pullback level of the GBP/USD rise in March/July this year.

Technical Analysis of the Trend of AUD/USD

On Wednesday, the performance of the Australian dollar was volatile, with the Australian dollar/US dollar repeatedly "bouncing" between slight gains and mild declines, but lacking clear direction guidance. Although in a hesitant environment, the AUD/USD seems to be brewing a potential double bottom. The double bottom pattern is usually seen as a signal of the depletion of downward pressure before the rebound unfolds.

Further understanding reveals that a double bottom is an inverted form, resembling a "W", consisting of two similarly horizontal bottoms and a neckline. Once the price reaches the "W" bottom and breaks above the neckline, it is confirmed that this bullish pattern has taken shape.

Ivestors can measure the potential increase in metric targets based on the vertical height from the breakthrough point to the "W" bottom, which will provide very similar numerical values to actual market fluctuations and valuable guidance for considering trading strategies and risk management.

In terms of AUD/USD, the neckline resistance is currently within the range of 0.6500-0.6510. If the exchange rate effectively breaks through this resistance, the buying momentum will accelerate, thus opening the door for further breaking the important psychological barrier of 0.6600. (Written by Diego Colman, translated by Lisa)

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