US Dollar traders on edge with US inflation print while Greenback plunge to two-month low

• US Dollar down against nearly every G10 currency. 
• The economic calendar takes the spotlight with US inflation numbers this Wednesday.
• The US Dollar Index continues its slide lower and starts to get in orbit around 101.00.

The US Dollar (USD) is in the red across the board against every major currency. Although no real outliers to notice, it is worth wild mentioning that the Greenback is eyeballing a few one-year-low levels against Polish Zloty (USD/PLN), the Swiss Franc (USD/CHF) and inverted nearing a one-year-high against the Euro (EUR/USD). This filters through in a fifth consecutive negative performance for the US Dollar Index which is starting to head 101.00.

The economic calendar is bearing a main event this Wednesday with the US Consumer Price Index (CPI) gauge. In all the equivalents on monthly and yearly performances, the core inflation will be the one to watch for any market-moving reactions. Seeing the recent data points in terms of services, expectations are that the core will remain sticky near 5% while any lower number will trigger further US Dollar weakness. 

Daily digest: US Dollar sinks to the bottom

• Some mild data to start at 11:00 GMT with the Mortgage Bankers Association issuing the Mortgage Applications for the first week of July. 
• Main event to take place at 12:30 GMT with the US Consumer Price Index (CPI) coming in. The overall CPI is expected to decelerate from 4% to 3.1% on a yearly basis, while the monthly is expected to pick up some pace from 0.1% to 0.3%. Main driver will be the core CPI which is forecast to stick to a 5% rise, coming from 5.3% on a yearly basis, while the monthly core inflation numbers are expected to slide from 0.4% to 0.3%.
• The estimates for the US core CPI number are between 4.8% and 5.1%. This means that any number below 4.8% will see a substantially weaker US Dollar, while a print above 5.1% will see a substantially stronger USD. A release in between will rather result in a muted and short-lived move in any direction. 
• Quite a few Fed speakers today: Neel Kashkari of the Ninth District Federal Reserve Bank at Minneapolis will speak at 13:45 GMT on monetary policy and banking solvency. Raphael W. Bostic from the Federal Reserve Bank of Atlanta will speak around 17:00 GMT at the Atlanta’s Fed Payments Forum. To close off the batch of Fed speakers, president of the Federal Reserve Bank of Cleveland Loretta Mester will speak on FedNow at 20:00 GMT. 
• The US Treasury is set to access the markets as well in order to allocate a 10-year bond auction.  
• The Japanese Topix heads lower and closes this Wednesday off by -0.67% after Machine Orders sinked into negative territory. China on the contrary was able to again eke out gains near 1%. European equities firmly in the green and US futures are mildly up. 
• The CME Group FedWatch Tool shows that markets are pricing in a 92.4% chance of a 25 basis points (bps) interest-rate hike on July 26. Chances of a second hike in November are down to 26.7%. It appears that markets are pricing out again the possibility of a second rate hike and presume that the Fed will hike in July for the last time. Markets expect US Fed Chairman Jerome Powell to announce that the pivotal level has been reached at the yearly Jackson-Hole Symposium between August 24 and 26 in Kansas. 
• The benchmark 10-year US Treasury bond yield trades at 3.94% and is continuing its slide lower from 4.09% last week. Traders are again doubling down on whether there will be more than one rate hike from the Fed. 

US Dollar Index technical analysis: Implosion possible on the back of US data

The US Dollar is in the ropes and does not seem to be able to trigger any turnaround at the moment. For a fifth consecutive day, the US Dollar is losing substantial ground. On Tuesday, it was Asian currencies which were weighing the Greenback, while this Wednesday the US Dollar is losing ground against nearly every major G10 traded currency. This smashes the US Dollar Index (DXY) again to the floor, with the 101 level coming into play, a nearly one-year-low. 

On the upside, look for 102.811 at the 55-day Simple Moving Average (SMA) that will partially re-gain its importance after having been chopped up that much a few weeks ago. Only a few inches above the 55-day SMA, the 100-day SMA comes in at 102.93 and could create a firm area of resistance in between both moving averages. In case the DXY makes its way through that region, the high of July at 103.57 will be the level to watch for a further breakout. 

On the downside, 101.50 has been broken and the US Dollar price action is starting to get into orbit around 101.00. Once that level is breached, expect to see the Greenback printing near one-year-lows against most major pairs. Special notice for 100.75, as that level has been a floor since February 2nd and could open the door for a slide below 100.00 once broken through it.