US CPI In Focus
The main data focus today, and for the week as a whole, is the December US CPI reading. Given the high level of hawkish Fed expectations the market will be looking to today’s data to essentially confirm a March rate hike. While the December jobs number was weaker than expected, bulls are taking this as a sign of the tightness in the labour market (especially given the fall back in unemployment and the lift in wages). With this in mind, a strong inflation reading today will likely reignite USD upside in the near term.
In terms of numbers, the market is looking for headline inflation of 0.4%, down from the prior month’s 0.8% reading with core inflation expected to be unchanged at 0.5%.The annual inflation rate, meanwhile, is expected to rise to 7%, which will mark its highest level since June 1982. If this reading is confirmed, USD upside should prevail. However, if wee see these forecasts undershot, we are likely to see some USD unwinding in the short-term.
Where to Trade US CPI?
Bullish USD Scenario - Silver (XAGUSD)
Silver prices are currently moving within a corrective bullish channel within the broader bear channel which has framed the longer-term downtrend. With price currently holding around the support region between 21.4525 – 22.3205, a solid USD up move from today’s data would likely refocus the market on the longer-term bear trend. Look for a break below 22.3205 to target 21.4525 and 19.56 thereafter.
Bearish USD Scenario – EURUSD
If we see USD trade lower from any data miss today, EURUSD looks set for at least a short term move higher. Price has been holding in a basing pattern for almost two months now. While 1.1377 continues to hold as resistance todays data could well fuel a break higher here, targeting 1.1527 initially.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.