The dollar index rallied in volatile trade on Wednesday, hitting an initial peak of 90.665 after surging CPI triggered a rise in Treasury yields, and it could now enter a consolidation period ahead of retail sales data in two days.
The dollar briefly shed gains as vice chair Richard Clarida said inflation increases should be transitory, before again rebounding with Treasury yields.
Resistance is at 90.708, the daily tenkan and 50% of the April's fall. Before the data, the dollar had already been boosted by oversold pressures and bullish divergence after it tumbled following Friday's unexpectedly weak non-farm payrolls report, which has since come into question amid signs of robust demand for labor despite low uptake from workers.
The post-payrolls fall broke the up trendline from January but stopped short of February's major low.
Rising inflation only benefits the dollar if the Fed tightens policy in response, which is questionable at this point.
Look for further consolidation of the jobs report drop ahead of Friday's retail sales report, with Friday's high and the 21-day moving average both at 90.963 pivotal.
(Randolph Donney is a Reuters market analyst. The views expressed are his own.) ((randolph.donney@thomsonreuters.com))
