We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Mixed
Gold
Bearish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Mixed
More View more
Real Time News
  • #Brazil benchmark equity index #Ibovespa suffered its biggest one-day decline since May 2017 and broke a 2-year uptrend after news broke that Latin America's largest country reported its first case of #Covid_19. It may be a painful session ahead when local markets open. https://t.co/YFLJD1gCVs
  • Bank of Japan's Kataoka: It is appropriate for the central bank to lower interest rates, BoJ should strengthen forward guidance. Coordination with fiscal policy very important -BBG
  • Looking at my majors-based #Yen index, #JPY could have quite the room to rally on average if there is a deeper turn in equities. The currency has still largely been consolidating since December on average and a break above the January and February highs could mark a bullish trend https://t.co/fIA4BeTmyf
  • The $JPY has lost out to a broadly resurgent US Dollar, with a clearly dwindling band of Yen bulls left to hope that the most recent rise has become overextended. Get your market update from @DavidCottleFX here:https://t.co/7Ndm5jiOi7 https://t.co/nP50B7d4yi
  • The double-edged sword of globalization: Pro: Hyper interconnectedness means everything is transmitted far more quickly. Con: Hyper interconnectedness means everything is transmitted far more quickly.
  • China reports 433 additional #coronavirus cases on February 26 which brings total to 78,497. 29 deaths were also reported bringing total fatalities to 2,744 -BBG
  • Bank of Korea says it will continue to monitor the #COVID19 outbreak (BBG)
  • BREAKING: SOUTH KOREA CONFIRMS AN ADDITIONAL 334 #CORONAVIRUS CASES BRINGING THE TOTAL TO 1595. (BBG)
  • The #Yen may rise after the #WHO reported that most new #coronavirus cases are now emanating outside of China. #SP500 futures are pointing lower with Thursday’s session in focus $USDJPY - https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/asia_am_briefing/2020/02/27/Yen-May-Rise-as-Most-New-Coronavirus-Cases-Emerge-Outside-of-China.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/md4R2F0JBe
  • #USDKRW down https://t.co/MJKDR1lPwM
EUR/USD: Trading the U.S. Consumer Price Report

EUR/USD: Trading the U.S. Consumer Price Report

2011-09-14 19:21:00
David Song, Currency Strategist
Share:

Trading the News: U.S. Consumer Price Index

What’s Expected:

Time of release: 09/15/2011 12:30 GMT, 8:30 EST

Primary Pair Impact: EURUSD

Expected: 3.6%

Previous: 3.6%

DailyFX Forecast: 3.4% to 3.7%

Why Is This Event Important:

Consumer prices in the world’s largest economy are projected to increase at an annual rate of 3.6% for the fourth consecutive month in August, and the stickiness in price growth could spark a bullish reaction in the U.S. dollar as it raises the risk for inflation. As price pressures intensify, the Federal Reserve may curb its willingness to expand monetary policy further, and the central bank may preserve a wait-and-see approach throughout the remainder of the year as the economic outlook remains clouded with high uncertainty.

However, the Fed may continue to talk down the risk for inflation as the slowing recovery dampens the outlook for price growth, and the central bank may take additional steps to shore up the economy in an effort to stem the downside risks for the economy. In turn, the FOMC may embark on a broad range of policy tools to stimulate growth, and the central bank may reiterate its pledge to retain the zero interest rate policy until mid-2013 to avert a double-dip recession.

Recent Economic Developments

The Upside

Release

Expected

Actual

Producer Price Index (YoY) (AUG)

6.5%

6.5%

ISM Prices Paid (AUG)

55.0

55.5

Personal Consumption Expenditure Core (YoY) (JUL)

1.5%

1.6%

The Downside

Release

Expected

Actual

Advance Retail Sales (AUG)

0.2%

0.0%

Change in Non-Farm Payrolls (AUG)

68K

0K

Consumer Confidence (AUG)

52.0

44.5

Businesses across the U.S. may pass on higher costs onto consumers in an effort to shore up their balance sheets, and a higher rate of inflation could lead the EUR/USD to give back the advance from earlier this week as market participants scale back speculation for further easing. However, the slowdown in private sector consumption paired with the drop in household sentiment may lead firms to absorb higher costs, and a soft CPI report could sap demands for the greenback as the Fed maintains a dovish outlook for monetary policy. In turn, the rebound in the EUR/USD may gather pace over the next 24-hours of trading, and the exchange rate may work its way back towards the 61.8% Fibonacci retracement from the 2009 high to the 2010 low around 1.3890-1.3900 as easing price pressures allow the FOMC to expand monetary policy further.

Potential Price Targets For The Release

EURUSD_Trading_the_U.S._Consumer_Price_Report_body_ScreenShot075.png, EUR/USD: Trading the U.S. Consumer Price Report

How To Trade This Event Risk

The stickiness in price growth would limit the Fed’s ability to embark on another round of quantitative easing, and a strong inflation reading could pave the way for a long U.S. dollar trade as market participants scale back speculation for additional monetary stimulus. Therefore, if the headline reading for inflation increases at an annualized pace of 3.6% or higher, we will need a red, five-minute candle following the release to generate a sell entry on two-lots of EUR/USD. Once these conditions are met, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will establish our first target. The second objective will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade reaches its mark in order to preserve our profits.

In contrast, firms may continue to absorb higher costs in an effort to draw increased demands, and a soft CPI report could weigh on the greenback as market participants see the FOMC taking additional steps to stimulate the ailing economy. As a result, if price growth comes in at a slower pace, we will implement the same strategy for a long euro-dollar trade as the short position laid out above, just in reverse.

Impact that the U.S. Consumer Price report has had on USD during the last month

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUL 2011

08/18/2011 12:30 GMT

3.3%

3.6%

-21

-42

July 2011 U.S. Consumer Price Index

The headline reading for U.S. inflation expanded at an annualized pace of 3.6% in July, while the core CPI increased 1.8% during the same period to mark the fastest pace of growth since December 2009. A deeper look the report showed a 1.5% rise in transportation costs paired with a 2.8% increase in energy prices, while the cost for food and beverages advanced 0.4% from the previous month. The stickiness in price growth is likely to become a growing concern for the Federal Reserve as the central bank looks to carry the zero interest rate policy well into 2013, but Fed Chairman Ben Bernanke may continue to talk up speculation for additional monetary stimulus as the region faces a risk of a double-dip recession. The higher-than-expected rate of inflation sparked a selloff in the EUR/USD, with the exchange rate slipping below 1.4300, but the greenback struggled to hold its ground during the North American trade as the exchange rate settled at 1.4331 at the end of the day.

EURUSD_Trading_the_U.S._Consumer_Price_Report_body_ScreenShot074.png, EUR/USD: Trading the U.S. Consumer Price Report

Questions? Comments? Join us in the DailyFX Forum

Join Currency Analyst David Song in the DailyFX Trading Room to cover the event LIVE!

View the Expo Presentation on ‘Trading the News’ For Additional Resources

To discuss this report contact David Song, Currency Analyst: dsong@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.