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
Bearish
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
Bearish
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
Gold
Bullish
Oil - US Crude
Bearish
Bitcoin
Bearish
More View more
Real Time News
  • The range in USD/CAD broke with aggression this week as CAD sellers pushed the currency after the Bank of Canada rate decision. Get your $USDCAD technical analysis from @JStanleyFX here: https://t.co/8oHoLLqvtR https://t.co/8ZXx6GbKAn
  • The $USD may fall against the Swedish Krona and Norwegian Krone if commentary from officials at the Davos forum uplift market mood and pressure haven-linked currencies. Get your market update from @ZabelinDimitri here: https://t.co/CPmNJSgHXY https://t.co/RdM0cbyfSf
  • The $AUD is pressuring four-month trend support against its US counterpart as sellers fight to reassert the dominant, long-term downtrend. Get your market update from @IlyaSpivak here:https://t.co/Bup64Arva9 https://t.co/CpraRXneTJ
  • The British Pound may fall as #Brexit commences, but will the Bank of England cut rates? The US Dollar could rise if the Fed spooks markets with plans to unwind repo operations $GBPUSD #BoE #GBP #Sterling - https://www.dailyfx.com/forex/fundamental/forecast/weekly/gbp/2020/01/26/British-Pound-May-Yet-Fall-on-Brexit-BoE-and-Fed-Are-Risks.html?CHID=9&QPID=917702 https://t.co/v39NsmOCwa
  • Central bank independence has several advantages and disadvantages. Find out what they are in-depth with @MartinSEssex here: https://t.co/wVFXbbTxf1 https://t.co/5VQdkbIqTo
  • Last week was more of the same, a narrowing range following the UK general election fireworks; GBP/USD has a couple of clear signposts to keep an eye on. Get your $GBPUSD technical analysis from @PaulRobinsonFX here: https://t.co/3pJfj0w2AX https://t.co/Cm6zhnBSGR
  • The $AUD is pressuring four-month trend support against its US counterpart as sellers fight to reassert the dominant, long-term downtrend. Get your market update from @IlyaSpivak here: https://t.co/Bup64Arva9 https://t.co/OLpavqPOVA
  • RT @globaltimesnews: A total of 1,052 cases of #coronavirus have been reported as of Jan 25 in #Hubei Province, with 129 in critical condit…
  • RT @FactSet: $SPX is reporting revenue growth of 2.9% for Q4, led by the Health Care (11%), Utilities (9%), and Communication Services (9%)…
  • The AUD has been hit by the risk-appetite pullback occasioned by the spread of Wuhan-strain coronavirus. This week may see domestic focus return, if headlines allow, with key inflation data due. Get your $AUDUSD market update from @DavidCottleFX here: https://t.co/UIpwno0pSq https://t.co/kib4d1mA0q
EURUSD: Trading the U.S. Consumer Price Report

EURUSD: Trading the U.S. Consumer Price Report

Share:

Trading the News: U.S. Consumer Price Index

What’s Expected:

Time of release: 03/16/2012 12:30 GMT, 8:30 EST

Primary Pair Impact: EURUSD

Expected: 2.9%

Previous: 2.9%

DailyFX Forecast: 2.9% to 3.0%

Why Is This Event Important:

Consumer prices in the world’s largest economy are expected to expand 2.9% for the second consecutive month in February, and the stickiness in inflation may spur a bullish reaction in the U.S. dollar as the development dampens speculation for another round of quantitative easing. As the Federal Reserve takes note of the more robust recovery, we should see Chairman Ben Bernanke continue to soften his dovish tone for monetary policy, and the central bank head may see scope to conclude the easing cycle in 2012 as the committee raises its fundamental assessment for the region.

Recent Economic Developments

The Upside

Release

Expected

Actual

Producer Prices ex Food and Energy (YoY) (FEB)

2.9%

3.0%

Advance Retail Sales (FEB)

1.1%

1.1%

Consumer Credit (JAN)

$10.450B

$17.776B

The Downside

Release

Expected

Actual

Average Hourly Earnings (YoY) (FEB)

2.0%

1.9%

Personal Income (JAN)

0.5%

0.3%

Trade Balance (JAN)

-$49.0B

-$52.6B

Businesses in the U.S. may pass on higher costs onto consumers amid the stickiness in core producer prices paired with the pickup in household spending, and an above-forecast print could generate a rebound in the USD as market participants scale back bets for QE3. However, subdued wage growth along with the slowdown in global trade may encourage firms to absorb higher costs, and businesses may keep a lid on consumer prices in an effort to draw domestic demands. In turn, a weaker-than-expected print could reignite speculation for additional monetary support, and we may see the EURUSD continue to recoup the losses from earlier this week as market participants maintain calls for more quantitative easing.

Potential Price Targets For The Release

EURUSD_Trading_the_U.S._Consumer_Price_Report_body_03.png, EURUSD: Trading the U.S. Consumer Price Report

A look at the encompassing structure of the EURUSD sees the pair briefly breaking below the 50% Fibonacci retracement taken form the January 16th advance at 1.3055 before rebounding sharply off trendline support early in the session. Today’s daily chart has now cleared yesterday’s low and high signifying an outside day and may suggest that the euro will continue to melt higher in the interim. Daily resistance comes in to play at the 38.2% retracement at 1.3155, backed by the 100-day moving average at 1.3220. Note that the daily relative strength index seems to have notably rebounded off trendline support with only a break below this support line offering conviction on subsequent shorts.

EURUSD_Trading_the_U.S._Consumer_Price_Report_body_03_1.png, EURUSD: Trading the U.S. Consumer Price Report

The euro broke above the confluence of channel resistance and the 78.6% Fibonacci retracement taken from the February16th advance at 1.3080 before losing steam just ahead of our soft resistance target at 1.3120. As noted in yesterday’s Scalp Report, we reserve this level as our topside limit with a break above eyeing topside targets at the 61.8% retracement at 1.3170, and 1.32-figure and 1.3230. Interim support now rests with the 78.6% retracement at 1.3080 backed by former trendline resistance, now acting as support. A break back into the previous channel formation alleviates some of the recent pressure on the greenback with such a scenario eyeing subsequent floors at 1.3035, the 1.30-figure, and the February low at 1.2974. Should the print prompt a bullish dollar response look to target downside levels with a break below the February low risking substantial losses for the single currency.

How To Trade This Event Risk

Market participants may overlook the headline reading for inflation as they expect the index to hold steady at 2.9%, but above-forecast print in the core reading could set the stage for a long U.S. dollar trade as the stickiness in price growth dampens expectations for more easing. Therefore, if the core CPI holds at 2.3%, we will need a red, five-minute candle following the release to generate a sell trade on two-lots of EURUSD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will generate our first target. The second objective 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 lock-in our profits.

On the other hand, the slowdown in wage growth paired with the weakness in global trade may lead businesses to keep a lid on consumer prices, and a soft inflation report could dampen the appeal of the reserve currency as market participants maintain bets for additional monetary support. As a result, if the CPI weakens from the previous month, we will carry out the same setup for a long euro-dollar trade 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)

JAN 2012

02/17/2012 13:30 GMT

2.8%

2.9%

+18

-35

January 2012 U.S. Consumer Price Index

EURUSD_Trading_the_U.S._Consumer_Price_Report_body_ScreenShot025.png, EURUSD: Trading the U.S. Consumer Price Report

The headline reading for U.S. inflation increased 2.9% in January after expanding 3.0% the month prior, and the stickiness in price growth certainly limits the Fed’s scope to expand monetary policy further as central bank officials expect to see a more robust recovery in 2012. Although the EURUSD tipped higher following the report, we saw the dollar gain ground throughout the North American trade, with the exchange rate ending the session at 1.3141.

--- Written by David Song, Currency Analyst and Michael Boutros, Currency Strategist

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

To contact Michael email mboutros@dailyfx.comor follow him on Twitter @MBForex.

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

To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@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.