- The March US Consumer Price Index is due on Wednesday, April 10 at 12:30 GMT.
- The inflation report on Wednesday will only underscore the belief that the Fed is due to keep policy on hold for the foreseeable future.
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04/10 WEDNESDAY | 12:30 GMT | USD Consumer Price Index (MAR)
The March US Consumer Price Index report is due to show a rebound in price pressures, in line with the continued rebound in energy prices as well as the improved streak of US economic data (Atlanta Fed GDPNow Q1’19 growth estimate is now 2.1%, up from 0.2% in the second week of March). Nevertheless, the readings are due short the Federal Reserve’s medium-term target of +2%.
According to Bloomberg News, headline CPI is expected in at +1.8% from +1.5%, and Core CPI is due in to hold at 2.1% (y/y). The inflation report on Wednesday will only underscore the belief that the Fed is due to keep policy on hold for the foreseeable future; Fed funds futures are pricing in a 39% chance of a 25-bps rate cut in October and a 56% chance of a 25-bps rate cut by December.
USDJPY Price Chart: Daily Timeframe (December 2017 to April 2019) (Chart 1)
Despite breaking the downtrend from the March swing highs, USDJPY has made no progress over the past few days. In returning back to former downtrend resistance, USDJPY has failed to climb back through the March 20 bearish outside engulfing bar high at 111.69. A return back to the April low at 110.80 isn't out of the question, and below there, loss could accelerate towards uptrend support after the January Yen flash-crash.
IG Client Sentiment Index: USDJPY (April 9, 2019) (Chart 2)
Retail trader data shows 41.4% of traders are net-long with the ratio of traders short to long at 1.42 to 1. In fact, traders have remained net-short since Mar 31 when USDJPY traded near 110.941; price has moved 0.2% higher since then. The number of traders net-long is 12.6% higher than yesterday and 0.7% lower from last week, while the number of traders net-short is 8.9% lower than yesterday and 2.8% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDJPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USDJPY price trend may soon reverse lower despite the fact traders remain net-short.
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--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher, email him at email@example.com