**US Dollar Tests Key Trendline Prior to PPI Release, AUD/USD Eyes Jobs Data**
*Original inspiration by Matt Weller, City Index*
The US dollar is at a pivotal technical juncture ahead of key macroeconomic releases this week, with markets closely assessing whether the greenback can sustain its recent momentum or if a reversal is imminent. As the US Producer Price Index (PPI) and key US inflation data approach, traders are also paying attention to the Australian dollar, particularly in light of the upcoming Australian labor market report.
This article provides an in-depth analysis of the technical outlook for the US dollar, major currency pairs such as AUD/USD, and the factors driving currency markets at present. We will include insights from various sources to provide a comprehensive overview of the forex landscape as it stands mid-June 2024.
—
## US Dollar Index (DXY): Clinging to Trendline Support
After a prolonged run boosted by expectations of continued Federal Reserve policy tightening, the US dollar is now probing a long-standing upward trendline, suggesting that any breach could trigger substantial volatility in the currency markets.
**Technical Overview:**
– The US Dollar Index (DXY), which tracks the greenback against a basket of major currencies, recently drifted toward the 105 level, testing a multi-month trendline stretching back to late 2023.
– DXY hit a temporary high near 106 in April, retraced briefly, and has since bounced between support and resistance levels.
– At present, traders are monitoring the 104.90-105.10 area for signs of a sustainable bounce or breakdown.
– Should the DXY break below this support, the next levels to watch are 104.30 and 103.90, which coincide with previous consolidation zones.
– On the upside, a recovery above 105.40 could confirm a resumption of the bullish trend, possibly retargeting the 106 area.
**Macro Drivers:**
– Anticipation surrounding the May US PPI release and subsequent Consumer Price Index (CPI) print is intensifying.
– The Federal Reserve’s tone remains cautious on inflation, and recent labor market data have been mixed.
– Market participants currently price in a roughly 60 percent probability of a rate cut by September, as per CME FedWatch tool data.
– Traders are also digesting speeches from Fed officials, who stress a data-dependent approach going into the summer.
—
## Upcoming US Producer Price Index: The Next Flashpoint
Wednesday’s release of the US PPI is the immediate focus for dollar traders. The PPI acts as a leading indicator for consumer prices and can influence expectations for Federal Reserve policy going forward.
**Expectations:**
– Consensus forecasts suggest US headline PPI will moderate in May, rising 0.1 percent month on month, down from 0.5 percent in April.
– Core PPI, stripping out food and energy, is also expected to show slower growth.
– Should the data
Read more on AUD/USD trading.