US CPI On Watch
US CPI will be the key data focus today and, on the back of last week’s bumper NFP result, USD bulls are looking for another quick win here to help drive USD higher. If we remembers back to last month’s CPI release however it was interesting to see that despite a solid reading, USD actually traded lower. The reason was that with so much hawkish expectations built into the market’s outlook on the Fed and USD, the bar for further USD upside had been raised.
So, it’s reasonable to expect that we might see a similar reaction this time, unless the result is much stronger than expected. Given that a March hike is fully priced in, a consensus result today will likely do little to drive USD higher. Meanwhile, given the recent pushing back we have heard from some Fed members, opposing the idea of tightening at a quicker pace than currently projected, any weakness today will likely be reflected in a sharp drop in USD. So, with that in mind, better risk:reward is likely on the downside for USD today.
Where to Trade US CPI?
EURUSD
Last week’s hawkish surprise from the ECB has positioned EUR well to take advantage of any near term, USD weakness, further evidenced by the retail market holding a near 80% short. The rally in EURUSD has seen the market trading back up to just beneath the 1.1527 level, following a break of the bear channel. Any USD weakness today, or in coming sessions, should see EURUSD breakout above the 1.1527 level, targeting 1.1703 initially.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.