TheNews

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

What’s Expected:

Even though Fed officials see scope for two rate-hikes in 2016, signs of a slower-than-expected recovery may push the Federal Open Market Committee (FOMC) to further delay the normalization cycle amid the external risks surrounding the real economy.

However, stronger wage growth paired with the rebound in private-sector spending may boost consumer prices, and a pickup in the headline & core rate of inflation may spur a bullish reaction in the U.S. dollar as it puts increased pressure on the Fed to implement higher borrowing-costs.

How To Trade This Event Risk

Bearish USD Trade: Core Rate of Inflation Narrows to 2.1% or Lower

• Need green, five-minute candle following the print to consider a long position on EUR/USD.
• If market reaction favors a bearish dollar trade, buy EUR/USD with two separate position.
• Set stop at the near-by swing low/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.

Bullish USD Trade: U.S. CPI Report Exceeds Market Forecast

• Need red, five-minute candle to favor a short EUR/USD trade.
• Implement same setup as the bearish dollar trade, just in reverse.

Potential Price Targets For The Release
EURUSD Daily

• Following the failed attempt to test the August high (1.1713), EUR/USD may continue to give back the advance from the previous month as it remains stuck in a descending channel formation, with a near-term hurdle coming in around 1.1210 (61.8% retracement) to 1.1230 (38.2% retracement).
• Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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