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
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
Gold
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
Oil - US Crude
Bullish
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
Bearish
More View more
Real Time News
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.52%, while traders in France 40 are at opposite extremes with 77.95%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/lXYqxrSYOx
  • LIVE NOW! Analyst and Editor @MartinSEssex will discuss the most important events and themes that have driven market sentiment and will drive it in the days ahead here - https://www.dailyfx.com/webinars/181540619?CHID=9&QPID=917720&utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • Commodities Update: As of 11:00, these are your best and worst performers based on the London trading schedule: Silver: 0.47% Gold: 0.38% Oil - US Crude: -1.46% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/ebwfouQlSh
  • Canadian Dollar Weekly Forecast: USD/CAD Reverses Lower, What’s Next? More details in the link below: https://www.dailyfx.com/forex/technical/home/analysis/usd-cad/2020/02/18/Canadian-Dollar-Weekly-Forecast-USDCAD-Reverses-Lower-Whats-Next-MK.html?CHID=9&QPID=917714 https://t.co/EiVBMfDCrE
  • Forex Update: As of 11:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.26% 🇯🇵JPY: 0.15% 🇨🇭CHF: 0.02% 🇨🇦CAD: -0.17% 🇦🇺AUD: -0.41% 🇳🇿NZD: -0.59% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/FwpqfFNv0d
  • My weekly free webinar on market sentiment is coming up at half past the hour. Do join me if you can. You can sign up here: https://www.dailyfx.com/webinars?ref-author=essex&QPID=917711&CHID=9
  • Indices Update: As of 11:00, these are your best and worst performers based on the London trading schedule: France 40: -0.40% US 500: -0.58% Germany 30: -0.64% Wall Street: -0.66% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/XGUopzAPTp
  • LIVE IN 30 MIN: Analyst and Editor @MartinSEssex will discuss the most important events and themes that have driven market sentiment and will drive it in the days ahead here - https://www.dailyfx.com/webinars/181540619?CHID=9&QPID=917720&utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • LIVE NOW! Currency Strategist @PaulRobinsonFX will keep you updated with the latest movements and trends during the London session for the FX and CFDs Market here - https://www.dailyfx.com/webinars/243785867?CHID=9&QPID=917720&utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • Join @MartinSEssex 's #webinar at 6:30 AM ET/11:30 AM GMT to learn more about trading #sentiment Register here: https://t.co/XUUPRdY06p https://t.co/O3LqxISfjo
EUR/USD: Trading the U.S. Consumer Price Report

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

2011-12-15 20:04:00
David Song, Currency Strategist
Share:

Trading the News: U.S. Consumer Price Index

What’s Expected:

Time of release: 12/16/2011 13:30 GMT, 8:30 EST

Primary Pair Impact: EURUSD

Expected: 3.5%

Previous: 3.5%

DailyFX Forecast: 3.5% to 3.6%

Why Is This Event Important:

The headline reading for U.S. inflation is expected to hold steady at an annualized rate of 3.5% in November, and the stickiness in price growth is likely to spark a bullish reaction in the greenback as the development dampens the likelihood of seeing another large-scale asset purchase program. As the FOMC softens its dovish tone for monetary policy, we should see the central bank maintain its current policy stance throughout the first-half of the following year, and Chairman Ben Bernanke may talk down expectations for another round of quantitative easing as the economic recovery gradually gathers pace. However, as the central bank head continues to highlight the ongoing weakness in the real economy, Mr. Bernanke may keep the door open to expand monetary policy further, and we may see a growing rift within the committee as some Fed officials see the recovery gradually gathering pace in 2012.

Recent Economic Developments

The Upside

Release

Expected

Actual

U. of Michigan Confidence (DEC P)

65.8

67.7

Consumer Credit (OCT)

$7.000B

$7.645B

Consumer Confidence (NOV)

44.0

56.0

The Downside

Release

Expected

Actual

Producer Price Index (YoY) (NOV)

5.8%

5.7%

Import Price Index (YoY) (NOV)

10.2%

9.9%

Average Hourly Earnings (YoY) (NOV)

2.0%

1.8%

The rebound in household sentiment paired with the ongoing expansion in consumer credit may encourage businesses to pass on higher costs onto consumers, and an unexpected rise in inflation may lead the EUR/USD to give back the rebound from January (1.2872) as market participants scale back speculation for QE3. However, easing commodity prices may lead firms to keep a lid on consumer prices, and a soft inflation print could spur bets for additional monetary support as the Fed maintains a cautious outlook for the region. In turn, the rebound from the monthly low (1.2945) may gather pace over the next 24-hours of trading, and the exchange rate may work its way back above the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3100 as investors increase bets for additional monetary stimulus.

Potential Price Targets For The Release

EURUSD_Trading_the_U.S._Consumer_Price_Report_body_ScreenShot069.png, EUR/USD: Trading the U.S. Consumer Price Report

How To Trade This Event Risk

As the stickiness in price growth dampens the Fed’s scope to expand monetary policy further, the consumer price report could pave the way for a long U.S. dollar trade as market participants scale back expectations for QE3. Therefore, if the headline reading for inflation expands 3.5% or greater in November, we will need a red, five-minute candle subsequent to 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 objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade reaches its mark in order to preserve our profits.

On the other hand, easing input costs paired with the slowdown in private sector consumption may encourage businesses to keep a lid on consumer prices, and a soft inflation report could spark a selloff in the USD as market participants ramp up expectations for more monetary easing. As a result, if the CPI weakens from the previous month, we will implement the same strategy for a long euro-dollar as the short position mentioned 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)

OCT 2011

11/16/2011 13:30 GMT

3.7%

3.5%

-9

-35

October 2011 U.S. Consumer Price Index

EURUSD_Trading_the_U.S._Consumer_Price_Report_body_ScreenShot068.png, EUR/USD: Trading the U.S. Consumer Price Report

Consumer prices in the world’s largest economy expanded at an annual rate of 3.5% in October after rising 3.9% the month prior, while the core rate of inflation advanced 2.1% during the same period to mark the fastest pace of growth since October 2008. The breakdown of the report showed a 2.0% drop in energy prices, with transportation costs falling 1.1% from the previous month, while prices for apparel increased 0.4% after contracting 1.1% in September. Although easing commodity prices have helped to dampen the risk for inflation, the rise in the core CPI may limit the FOMC’s scope to expand monetary policy further, and we should see the central bank carry its current policy into the following year as Fed officials expect the economic recovery to gradually gather pace over the coming months. Indeed, the initial reaction to the report was short-lived, with the EUR/USD climbing back above 1.3500, but the greenback gained ground during the North American trade as the pair settled at 1.3461 at the end of the day.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Questions? Comments? Join us in the DailyFX Forum

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

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

DISCLOSURES

News & Analysis at your fingertips.