TheNews

Trading the News: U.S. Consumer Price Index (CPI)

An uptick in both the headline and core U.S. Consumer Price Index (CPI) may undermine the near-term rebound in EUR/USD as it encourages the Federal Open Market Committee (FOMC) to implement higher borrowing-costs over the coming months.

The U.S. Consumer Price Index (CPI) climbed to an annualized 1.9% in August from 1.7% the month prior, while the core rate of inflation held steady at 1.7% per annum amid forecasts for a 1.6% print. A deeper look at the report showed Energy prices climbing 2.8% to lead the advance, with Transportation costs also rising 1.4%, while prices for apparel increased a marginal 0.1% in August. The initial reaction to the CPI report was short-lived, with EUR/USD climbing back above the 1.1900 handle to end the day at 1.1918.

How To Trade This Event Risk

Bullish USD Trade: Headline & Core CPI Pick Up in September

• Need a red, five-minute candle following the CPI report to favor a short EUR/USD trade.
• If the market reaction favors a bullish dollar position, sell EUR/USD with two separate lots.
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bearish USD Trade: U.S. Inflation Report Fails to Meet Market Forecast

• Need a green, five-minute EUR/USD candle to favor a long EUR/USD trade.
• Implement the same approach as the bullish dollar position, just in the opposite direction.

Potential Price Targets For The Release
EUR/USD Daily Chart



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