US CPI On Watch
The big data focus for markets today, and this week indeed, is the US CPI release for April. Following the 0.6 headline CPI reading over the prior month, the market is forecasting a decline to 0.2% over May. Core CPI, however, is forecast to remain unchanged at 0.3%. This reading is attracting a great deal of attention given the upward revisions to the fed’s economic forecasts delivered at its recent meeting. With the Fed now acknowledging that inflation is likely to rise as a result of reopening and the utilisation of the pent-up demand in the economy, there are upside risks for today’s data, especially given the low expectations.
If inflation beats the consensus forecasts there is plenty of room for USD to reverse higher given the sell-off over the last month. A firm beat will put the focus back on Fed tapering discussions pushing yields and US higher, while pulling equities down deeper. On the other hand, if CPI misses today or merely comes in inline with expectations, the USD reaction is likely to be muted though we could see some lift in equities markets.
Where to Trade US CPI?
US 10Y
The US10Y has been correcting lower within a bearish channel since the 2021 highs in March. The structure can be viewed as a bull flag formation, suggesting an eventual break higher and continuation of the bullish phase over Q1. Strong CPI today could see price break the channel and test the 1.685 level next with the 1.770 highs the target above.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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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.