Two Reasons Why the US Dollar May Have Peaked

The US dollar has topped out at 110.20, our target from last month. The last time we hit this target was earlier this month, then the markets started to anticipate that the inflation had plateued, and we saw a significant retracement back to the 107's. However, they were proven sorely wrong as inflation came in strong with CPI last week. Even with this surprise print and a looming Fed rate hike on the horizon, the DXY still has not broken highs. These two factors make us think that the DXY may have peaked and we might be due for a correction or reversal. A consistently strong dollar is already impacting import/export prices, and this will ripple through the economy. Additionally, the Fed is likely to backpedal from their hawkish rhetoric with potentially one more rate hike in the tank before they have to start cutting again. If the DXY can pick up then 111.37 is our next target. If not, we should have support in the 109's, then 108.50, with 107.20 a floor.