Breakdown of the latest developments on the global exchanges
Nov 10, 2021, 2:51 PM GMT

U.S. Inflation Topped a Three-Decade High, Red Flags for Powell and the FED

U.S. Inflation Topped a Three-Decade High, Red Flags for Powell and the FED

Volatility on the dollar jumped today following the publication of the latest Consumer Price Index (CPI) data. Inflation grew more than expected in October, which is likely to make the greenback even more erratic. You can read more about its current state from our newest GBPUSD analysis.

Headline inflation in the U.S. soared to 6.2 per cent in October, beating the preliminary forecasts. Consumer prices topped a three-decade high as economic activity continues to grow. FED's tapering decision may have come a bit too late as inflation is already well-above FOMC's 2.0 per cent longer-term target.

U.S. MoM Inflation Rate

The increase of nearly 1.0 per cent from a month prior signifies the possibility of consumer prices ballooning out of control as global supply distortions continue to keep demand high. This was also reflected in the value of the dollar, as the USDCAD continues to fluctuate in the short term.

USDCAD 4H Price Chart

The price action is currently in the process of establishing a bullish pullback, as illustrated on the 4H chart above, from the previous downtrend. It is represented as an ascending channel (in green).

The price action is likely to be denied at the 23.6 per cent Fibonacci retracement level at 1.24314 as the underlying momentum becomes increasingly more bearish-oriented. A major reversal is likely to occur from this crucial threshold given the recent development of a Shooting Star candle.

This will be confirmed if the price action closes below the major support level at 1.23900, which is currently converging with the lower limit of the channel. The latter is underpinned by the 100-day MA (in blue).

Energy remains the biggest determinant of inflation


The Consumer Price index (CPI) jumped by 0.9 per cent in October vs 0.6 per cent expected. This marks a sizable rebound from the 0.4 per cent growth that was observed in September.

The biggest contributor was once again energy with 4.8 per cent. This is also reflected in the price of crude oil, which continues to be trading near a multi-year peak.