US dollar rallies back into bullish territory

The US dollar rallied on Tuesday against the yen, euro and other currencies following stronger-than-expected US inflation data that rocked US stocks, bolstered US yields and sent the greenback towards last week’s two-decade peak of 110.79. The price made a high of 110.01 before bears cleaned up across the counterparts for low-hanging fruit in the corrections.

However, while the DXY fell to a low of 109.257, it did not stay down there for long. The index has since rallied back to test the 109.70s which is encouraging for the bulls. Technically, the bulls will want to see 109.90 cleared before the week is out ahead of what is expected to be a hawkish Federal Reserve outcome next week.

There are no Federal Reserve speakers this week as the media blackout went into effect at midnight Friday ahead of Chair Jerome Powell’s post-decision press conference on September 21. Traders expect 75 basis points when its policy committee meets next week and lower market hopes for a smaller increase. However, there is a one-in-five chance that the Fed will raise rates by a full percentage point, up from zero a day before the inflation report.