TheNews

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

Even though the U.S. Consumer Price Index (CPI) is expected to hold steady at an annualized 1.1% in May, an uptick in the core rate of inflation may prop up the greenback and spark a near-term pullback in EUR/USD as it puts greater pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy sooner rather than later.

What’s Expected:

Why Is This Event Important:

Even though the FOMC votes unanimously to retain its current policy in June, heightening price pressures may push the central bank to implement higher borrowing-costs over the coming months as it runs the risk of overshooting the 2% inflation-target over the policy horizon.

How To Trade This Event Risk

Bullish USD Trade: Core Rate of Inflation Advances 2.2% or Greater

• 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.

Bearish USD Trade: U.S. CPI Report Fails to Meet Market Expectations

• 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 H4



The U.S. Consumer Price Index (CPI) increased an annualized 1.1% in April following the 0.9% expansion the month prior, while the core rate of inflation narrowed to 2.1% from 2.2% during the same period. A deeper look at the report showed transportation costs climbing another 0.7% on the back of higher energy prices, which was accompanied by a 0.2% rise in food costs, while prices for apparel slipped 0.3% in April. The U.S. dollar struggled to hold its ground following the slowdown in core inflation, with EUR/USD bouncing back from the 1.1300 handle to end the day at 1.1309.

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