TheNews

Trading the News: U.S. Consumer Price Index

A pickup in the U.S. Consumer Price Index (CPI) accompanied by stickiness in the core rate of inflation may boost the appeal of the greenback and spark a further decline in EUR/USD as it boosts interest-rate expectations.

What’s Expected:

Why Is This Event Important:

Even though the Federal Open Market Committee (FOMC) appears to be in no rush to implement higher borrowing-costs, stronger price growth may put increased pressure on the central bank to further normalize monetary policy especially as the U.S. economy approaches ‘full-employment.’

Nevertheless, waning confidence along with the slowdown in household spending may drag on price growth, and a softer-than-expected inflation report may weigh on the dollar as it increases the Fed’s scope to further delay its normalization cycle.

How To Trade This Event Risk

Bullish USD Trade: CPI Report Highlights Sticky U.S. Price Growth

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

Bearish USD Trade: Headline & Core Rate of Inflation Fail to Meet Market Forecast

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

Potential Price Targets For The Release
EURUSD Daily

• EUR/USD stands at risk for a larger pullback as the Relative Strength Index (RSI) fails to preserve the bullish formation carried over from February, with the next key downside region of interest coming in around 1.1090 (50% retracement) to 1.1110 (50% retracement).
• Interim Resistance: 1.1510 (50% retracement) to 1.1520 (61.8% expansion)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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