The USD corrective uptrend finally ran out of steam on Tuesday, as attempts to break above the 104.20 horizontal resistance level late last week and Monday failed. Buyers folded their hands ahead of the release of the US CPI for November and the FOMC meeting tomorrow:

Despite the decline, the price remains in an upward channel but is very close to breaking below the short-term support (lower line). If events today and tomorrow give the sellers a free hand and the price consolidates below 103.50, then the bearish sentiment on the USD is likely to gain ground, and the medium-term outlook will become less rosy for the greenback. 

Speaking of today's release of the US CPI for November, the market expects the headline figure to be 4% (unchanged from October). Of course, the primary importance will be the behaviour of core inflation, as it contains the components that shape the inflation trend, such as services inflation or rental housing inflation. In the past month, their changes were very encouraging, and if growth slows down for the second month in a row, the Fed will likely be forced to admit that the markets are "partially right" about the possibility of rate cuts in 2024. Although even without the inflation report, there are already similar statements. For example, a quote from Fed Governor Chris Waller who suggested that if inflation continues to decline "for a few more months - I don't know how long that might be - three months, four months, five months - and we will be confident that inflation is really declining and going into decline, then it will be possible to start lowering the target rate." 

Bearish pressure on the USD could have been even stronger today if it weren't for British labour market data that weakened the pound. Statistics on the labour market for October showed that wages in annual terms grew by 7.2% - significantly below the forecast of 7.7%. The slowing of this indicator with a high degree of probability means that consumer inflation will also slow down in the coming months, and therefore the easing of monetary policy in England will most likely begin earlier than previously thought.

GBPUSD is trading above the opening level in anticipation of the release of the US inflation report, but only slightly, with growth fluctuating in the range of 0.1-0.2%. British government bonds jumped in price after the release of the report, with the yield on 10-year bonds losing about 10 basis points. 

Sentiments on the currency market today and tomorrow will obviously be shaped depending on whether the USD will be sold against other currencies or bought. Technical analysis and preliminary data on inflation in the United States (PMI indexes, labour market statistics, inflation expectations) indicate that the risks for inflation, and therefore for the American currency, are shifted down. The short-term target for the USD is a break of 103.50 on the DXY index, consolidation below the level, and subsequent movement towards the November lows (102.50-103).