US Dollar Fails to Breakout Amid Strong Fundamental Case

The US Dollar (USD) has had a red week despite building expectations for a rate hike from the Federal Reserve, which is unusual given the strong fundamental case for a breakout and fresh highs.

Headline inflation came in at 3.4% as expected, but it was the inflation expectations in the University of Michigan survey that really stood out, showing widespread expectation for prices to continue moving higher.

Despite the European Central Bank (ECB) hiking rates by 25 basis points and initial market reaction suggesting it was well-priced-in, EUR/USD set up a doji on the weekly chart, further highlighting how the crowded USD/JPY carry trade is likely playing a larger role in DXY dynamics.