Week Ahead: USD faces triple risk – Tariffs, Powell & CPI

*Note: This report was written before the US NFP data was published*

• FXTM USDInd ↓ 0.7% MTD

• China retaliatory tariffs take effect 10th Feb

• Powell’s testimony + US CPI = more USD volatility?

• US CPI sparked moves of ↑ 0.9% & ↓ 0.6% over past year

• Technical levels: 109.10, 108.20 & 107.00

China’s retaliatory tariffs against the United States are set to take effect on Monday 10th February.

How Trump responds may set the tone for global markets in the week ahead.

Beyond tariffs, Powell’s testimony and key data including the latest US CPI could present fresh trading opportunities:

Sunday, February 9th

• CN50: China PPI, CPI

Monday, 10th February

• China’s retaliatory tariffs on US goods take effect

Tuesday, 11th February

• AU200: Australia Westpac consumer confidence
• MXN: Mexico industrial production, international reserves
• ZAR: South Africa manufacturing production
• GBP: BOE Governor Andrew Bailey speech
• USDInd: Fed Chairman Jerome Powell testimony, Fed speak

Wednesday, 12th February

• USDInd: Fed Chairman Jerome Powell testimony, US January CPI, Fed speak

Thursday, 13th February

• EUR: Eurozone industrial production
• GER40: Germany CPI
• JP225: Japan PPI
• UK100: UK industrial production, GDP
• US500: US initial jobless claims, PPI

Friday, 14th February

• EUR: Eurozone GDP
• NZD: New Zealand food prices, BusinessNZ manufacturing PMI
• USDInd: US retail sales, industrial production

FXTM’s USDInd is under the spotlight after shedding roughly 2% from Monday’s peak.

Fading concerns over Trump’s tariff threats have weakened the dollar. However, an air of caution still lingers as trade war fears keep investors on edge.

Prices remain within a range on the weekly charts with support at 107.00 and resistance at 110.00.

*Note: This chart was created before the US NFP data was published*

The USDInd tracks the dollar’s performance against a basket of six different G10 currencies, including the Euro, British Pound, Japanese Yen, and Canadian dollar.

With all the above said, here are 4 reasons why the USDInd could see more price swings:

  1) China’s retaliatory tariffs

China is expected to slap 15% tariffs on U.S. coal and liquefied natural gas as well as a 10% tariff on crude oil, farm equipment, pickup trucks, and large-engine cars.

These are expected to come into effect on Monday 10th February.

• If China’s retaliation results in Trump slapping more tariffs on Chinese imports, this could fuel trade war fears – boosting safe-haven assets like the dollar.

• Should China’s retrained response open the doors to possible negotiations, the dollar may weaken as trade war fears cool.

  2) Fed Chair Powell’s 2-day Testimony

Fed Chair Jerome Powell’s semi-annual testimony before Congress may provide key insight into future policy moves.

During January’s FOMC meeting, Powell stated that the Fed was in no hurry to cut interest rates due to a strong economy and stubborn inflation.

• Should Powell repeat the same message and strike a hawkish note, this could support the dollar.

• If the Fed Chair sound more dovish than expected, this may weaken the USDInd.

  3) US January CPI report

The January Consumer Price Index (CPI) published on Wednesday 12th February may influence Fed cut bets.

Markets are forecasting:

• CPI year-on-year (January 2025 vs. January 2024) to remain unchanged at 2.9%.

• Core CPI year-on-year to remain unchanged at 3.2%.

• CPI month-on-month (January 2025 vs December 2024) to cool 0.3% from 0.4%.

• Core CPI month-on-month to rise 0.3% from 0.2%.

Over the past 12 months, the US CPI has triggered upside moves of as much as 0.9% or declines of 0.6% in a 6-hour window post-release.

Note: The US retail sales report, industrial production and speeches by Fed officials are likely to influence the dollar.

• A softer-than-expected US CPI report could pull the USDInd lower as Fed cut bets jump.

• Should the inflation report print above market forecasts, this could support the USDInd.

  4) Technical forces

The USDInd is under pressure on the daily timeframe. Prices are trading below the 21 and 50-day SMA.

• A breakdown below 107.00 could open a path toward 106.40 and the 100-day SMA at 105.90.

• Should prices push back above 108.20, this could see an inline toward the 21-day SMA, 109.10 and 110.00.

*Note: This chart was created before the US NFP data was published*