EUR/USD to Mount Larger Rebound on Slowing U.S. Core CPI

DailyFX.com –

– U .S. Consumer Price Index (CPI) to Rebound to Annualized
1.1% in April.

– Core Rate of Inflation Expected to Slow for
Second-Consecutive Month.

For more updates,
sign up for David’s e-mail distri b ution list

.

Trading the News: U.S. Consumer Price Index (CPI)

Despite forecasts for a rebound in the U.S. Consumer Price
Index (CPI), another slowdown in the core rate of inflation may
dampen the appeal of the greenback and spark a near-term advance
in EUR/USD as it drags on interest-rate expectations.

What’s Expected:

Click Here for the
DailyFX Calendar

Why Is This Event Important:

Even though Fed officials see scope for two rate-hikes in
2016, signs of a slower-than-expected recovery may push the
Federal Open Market Committee (FOMC) to further delay the
normalization cycle amid the external risks surrounding the real
economy.

Expectations: B earish Argument/Scenario

Release

Expected

Actual

Non-Farm Payrolls (APR)

200K

160K

ADP Employment (APR)

195K

156K

Gross Domestic Product (Annualized) (QoQ) (1Q A)

0.7%

0.5%

Easing job growth accompanied by signs of a slowing recovery
may push U.S. firms to offer discounted prices, and a
softer-than-expected CPI report may weigh on the greenback as
market participants push out bets for the next Fed rate-hike.

Risk: B ullish Argument/Scenario

Release

Expected

Actual

Advance Retail Sales (MoM) (ARP)

0.8%

1.3%

Personal Income (MAR)

0.3%

0.4%

Average Hourly Earnings (YoY) (APR)

2.4%

2.4%

However, stronger wage growth paired with the rebound in
private-sector spending may boost consumer prices, and a pickup
in the headline & core rate of inflation may spur a bullish
reaction in the U.S. dollar as it puts increased pressure on the
Fed to implement higher borrowing-costs.

How To Trade This Event Risk (
Video

)

Bearish USD Trade: Core Rate of Inflation Narrows to 2.1% or
Lower

Need green, five-minute candle following the print to
consider a long position on EUR/USD.

If market reaction favors a bearish dollar trade, buy
EUR/USD with two separate position.

Set stop at the near-by swing low/reasonable distance from
entry; look for at least 1:1 risk-to-reward.

Move stop to entry on remaining position once initial
target is hit; set reasonable limit.

Bullish USD Trade: U.S. CPI Report Exceeds Market Forecast

Need red, five-minute candle to favor a short EUR/USD
trade.

Implement same setup as the bearish dollar trade, just in
reverse.

Potential Price Targets For The Release

EURUSD Daily

Chart – Cre ated Using
FXCM Marketscope 2.0

Following the failed attempt to test the August high
(1.1713), EUR/USD may continue to give back the advance from
the previous month as it remains stuck in a descending channel
formation, with a near-term hurdle coming in around 1.1210
(61.8% retracement) to 1.1230 (38.2% retracement).

Interim Resistance: 1. 1760 (61.8% retracement) to 1.1810
(38.2% retracement)

Interim Support: Interim Support: 1. 0380 (78.6% expansion)
to 1.0410 (61.8% expansion)

Check out the
short-term technical levels that matter for
USD/CAD

heading into the report!

Avoid the pitfalls of trading by steering clear of classic
mistakes. Review these principles in the ”
Traits of Successful Traders

” series.

Impact that the U.S. Consumer Price report has had on EUR/USD
during the previous month

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAR 2016

04/14/2015 12:30 GMT

1.0%

0.9%

+22

+13

March 2016 U.S. Consumer Price Index (CPI)

The U.S. Consumer Price Index (CPI) unexpectedly narrowed in
March, with the headline reading slipping to an annualized 0.9%
from 1.0% the month prior, with the core rate of inflation
following suit as the figure slowed to 2.2% from 2.3% during the
same period. A deeper look at the report showed a 1.1% decline in
prices for apparel, which was accompanied by a 0.2% drop in
prices for food/beverages, while transportation costs increased
0.4% as energy prices climbed 0.9%. The greenback struggled to
hold its ground following the weaker-than-expected CPI report,
with EUR/USD advancing from the 1.1250 region to end the day at
1.1265.

Get our top trading opportunities of 2016
HERE

Check out
FXCM’s Forex Trading Contest

Read More:

Record Trend Following Long Position in
Gold

AUD/CAD Into Key Support- Monthly Opening Range
In Focus

US Dollar Bear Trap within an Even Bigger Bull
Trap?!

USD/JPY Technical Analysis: Has It
Bottomed?

— 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, please
follow this link

.

original source

DailyFX

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

Learn forex trading with a free practice account and trading
charts from
FXCM

.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in:

Investing

, Forex


Download

Leave a Reply

Your email address will not be published. Required fields are marked *