US inflation slows down. Forex Markets respond.

For the last couple of months, the USD currency has been soaring with inflation which has caused the dollar to continually rise in value. The Federal Reserve Bank had committed itself to reverse the effects of inflation with heavy-handed tactics such as interest rate hikes and so forth. The reports on the 10th displayed by the FRB show that inflation has indeed slowed down from 8.2% to 7.7%. What does this mean for the USD currency and how is this affecting the forex market？

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Due to the recent oil crisis, the war and Ukraine and ramifications of COVID 19 financial polices the US has suffered record inflation this year. You can see the effects of the rapid inflation by looking into USD related pairs. Depending on weather USD is the base currency or not, these pairs have been trading in the same direction for the majority of the year untill now.

The value of the dollar was rising faster than currencies around it which meant that getting American items became more expensive as opposed to exporting from else where. This in turn has created a large trade deficit for America, as for Americans it was easier to purchase exported goods with the dollar which would give them more value as opposed to shopping for local items at higher prices.

It's for reasons like this that Governments usually wants to rid the country of rapid inflation and it seems that the American fical policy my have done so with the latest report.

The slow down in inflation signals a change in the projection of the US dollar. The US dollar is the most traded currency in the world, an effect on the dollar is bound to have an effect on the rest of the economy. There has been a massive change in market sediment recently due to the new USA report and depending on the pair you trade you can witness a change in the overall direction of the market.

What does this mean for us Traders

Depending on the pair you trade it's time to start looking for opportunities. For pair which start with (USDZAR,USDCAD. etc) we should start looking for shorting opportunities. For pairs which end with USD (EURUSD, GBPUSD) we should be looking for long opportunities. Start looking into major areas of support and resistance in the pair and trade accordingly. For those who swing trade this may be the time to enter long term positions as the market sediment is still fresh.