US PPI: The last look at inflation for the Fed before the FOMC meeting

The March FOMC interest rate decision meeting concludes tomorrow. (See our complete FOMC preview here). The February Producer Price Index (PPI) was the last piece of inflation data that the FOMC will see before the meeting concludes. The headline print was 10% YoY, in line with expectations. The bigger news is that the January print was revised from 9.7% YoY to 10% YoY, making the February print seem even stronger. This is the highest reading since 1981! The Core PPI print, which excludes food and energy prices, was 8.4% YoY, lower than the expectation of 8.7% YoY. However, the January print was revised higher from 8.3% YoY to 8.5% YoY. Keep in mind that the headline print does not yet include the large run up in oil prices that were saw in the first half of March after Russia invaded Ukraine.

The US Dollar Index (DXY) has been moving higher in an orderly channel since late May 2021. Last week, the DXY reached its highest level since May 2020 at 99.42 as price traded above the top trendline of the channel. The Dollar Index tried to move back inside the channel late last week but failed. Resistance is holding thus far near the 161.8% Fibonacci extension from the highs of January 29^th to the lows of February 4^th near 98.96.

Source: Tradingview, Stone X

On a 240-minute timeframe, the price action of DXY may be setting up a double top. If price breaks support at 97.73, it will confirm a double top is in place and target 96.21 on the downside. However, if the DXY is to reach the target, it must first break through the support at 97.44. Below there is a confluence of support at the highs of February 14^th and an upward sloping trendline dating to January 14^th near 96.40. Notice on the daily timeframe that the 50-Day Moving Average comes in near those levels as well at 96.50. First resistance is at the March 7^th highs of 99.42. Above there, resistance is at a confluence of the 127.2% Fibonacci extension from the highs of March 7^th to the low of March 10^th at 99.82 and the psychological round number resistance at 100.00. The 161.8% Fibonacci extension is the next resistance level near 100.47.

Source: Tradingview, Stone X

PPI was the last piece of inflation data that the Fed will get to see before it makes its decision on whether to hike interest rates tomorrow. However, the headline number was in line with expectations at a stubbornly high 10%. Although this print is very high, a single economic data point is unlikely to sway the Fed’s decision.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.