US30 Up After Powell, US Inflation

US Inflation

Consumer Price Index (CPI) surged 7% y/y in December, compared to 6.8% prior, the highest level since June 1982. This is when Ronald Reagan was President of the United States and Paul Volcker was at the helm of the Federal Reserve!

On the Core front, CPI rose 5.5% y/y versus 4.9% prior, the highest since 1991.

Powell Testimony

The President of the Fed sounded a bit tame in regards to the central bank's tightening path during his nomination hearing on Wednesday ^[1], at least compared to last week's minutes and recent commentary and actions.

Mr Powell said that the bank will end asset purchases in March, raise rates over the course of the year and "at some point perhaps later this year allow the balance sheet to run off." It now remains to be seen whether we are reaching a ceiling in the Fed's recent hawkiness.

US30 Reaction

The index had registered new record highs last week, but had since entered a 4-day correction, which was halted on Wednesday with the help of Mr Powell's reserved tone and extends those gains today, after the CPI report.

Inflation was pretty much in-line with expectation and markets may also be thinking that it approaches a peak, as they are not bothered by it for now.

Having defended the EMA100 (black line,) bulls remain in the driver's seat and have the ability to reach 37,000 for the first time in history, but we are not sure if they are yet ready for that.

On the other, Inflation did surge and the central bank seems set for an aggressive normalization path, which may weigh on US30, while the rise seems a bit extended.

Pressure back to the EMA100 (around 36,000) could be in the cards, but a strong catalyst would be required for a move below the ascending trend-line from December lows (around 35,600).