The USD Index is poised to plunge to new bear market lows on its monthly chart. It might be looking to retest the 50-month simple moving average (SMA) at 101.73 before long. This as the index has already rebuffed resistance at 109.33 so far this year. From a technical perspective, the current position of the USD Index would argue for strong inflation pressures. Just last week, core PCE inflation came in at +0.4% m/m and +2.8% y/y, underscoring this trend. Australia’s ‘trimmed mean’ inflation measure has eased from a high point. At the same time, the UK’s core CPI inflation is coming down, mirroring a more mixed inflation picture globally.
US core PCE inflation came in much hotter than forecast. Truth be told, the impact was not enough for the USD to gain any meaningful ground. USD Index monthly chart showing support at £0.8229-£0.8315. As you can see, the last rebound did not even get anywhere close to a significant higher high. This suggests that any bullish breakout could be limited by significant trendline resistance. The ‘alternate’ AB=CD pattern at £0.8331 was a 1.272% Fibonacci projection ratio. This pattern offered powerful bullish momentum to the pair as it opened near last week’s close.
The AUD/NZD cross demonstrates a clear downtrend on the daily chart. It made a double-top formation after having broken below the neckline at N$1.0942. This bearish advance comes in spite of support at N$1.0978, which is a yearly opening level. US economic outlook According to the US Federal Reserve’s nowcast model, the first quarter of 2025 will see a -1.8% contraction. In contrast, a different predictive model, based on the inclusion of gold imports and exports, expects a milder decline of only 0.2%.
USD Index Technical Analysis
In USD’s case, the index index is exploring the technical underbelly of its monthly chart. The opportunity to test the 50-month SMA at 101.73 is very high. This comes after a rejection of resistance at 109.33 from earlier this year. The index’s technical position highlights the lasting inflation hawkishness that has continued to drag down the index’s performance.
The recent increase in core PCE inflation therefore is an alarming signal of strong and broad-based inflationary pressures. It was up 0.4% MoM and 2.8% YoY. The USD has been unable to build serious momentum in the face of these data releases. This reflects that the market is doubtful of its capacity to hold up upward trajectory.
The monthly chart shows support levels at £0.8229 and £0.8315, providing a degree of stability in the face of ongoing market volatility. Each subsequent rebound has failed to make a new, higher high. This suggests that trendline resistance will be a cap on further upward movements.
Global Inflation Trends
This microcosm of inflationary trends largely defines the story across global markets. More down under, the Reserve Bank of Australia’s preferred measure of inflation—the ‘trimmed mean’—has cooled down a tick to 2.7% YoY from 2.8%. This represents a slight easing of inflationary pressures relative to past months.
The UK’s core CPI inflation gave signs of easing slightly, falling from 3.7% to 3.5%. These numbers point to the continued willingness or maybe even the desperation of central banks to keep inflation somewhere in their entire economic models.
Contrary to what one might surmise given these trends, the USD has not reaped exorbitant strength. This was partly because of US data showing a stronger-than-expected increase in core PCE inflation for February. This highlights a new, unpredictable dynamic competition between inflation expectations and local currency valuation.
AUD/NZD Cross Developments
The AUD/NZD cross is actually in the very budding stages of a medium-term downtrend on the daily chart. This bearish trend is defined by a formed double-top pattern after breaking the neckline at N$1.0942. Support at N$1.0978 is an important annual opening support level. It has not, however, prevented the downtrend from really taking root.
Such moves in the AUD/NZD cross are a product of wider currency market developments driven by those economic drags alongside risk-on sentiment. Traders and investors watch these trends intently. Currency movements depend on constant fluctuation from domestic and foreign factors.