With inflation on everyone’s mind, today’s US CPI print is a must-watch event for traders. This announcement should help confirm to the Fed if a 50 basis point hike is needed at their next meeting, which would further boost the USD compared to other pairs.
EURUSD
Looking at EURUSD, we have seen a steady downtrend since May 2021 on the daily chart, with the 50 period SMA providing much resistance to any bullish moves in the pair. Trading at the lows for the year at 1.08780, a strong CPI print in the US could push EURUSD down to the support of 1.0640, which was the low for 2020. If we see CPI figures come in lower than expected, we expect EURUSD to rally with resistance either at the 50 period SMA or 1.1180 (previous support from Nov – March).
GBPUSD
Similar to EURUSD, GBPUSD has been trading in a downward channel on the daily chart since early May 2021 and is currently trading at 2-year lows of 1.30242 at the time of this writing. With 1.30000 being a big figure and showing support, traders should keep an eye out for any surprises in US CPI. If CPI prints higher inflation than expected, we could see new lows for the year in GBPUSD if it breaks below 1.30000. The next support should be in the 1.2675 level on the daily chart.
The cool chart above is a snapshot from Trading Central’s Economic Insight. This tool is super useful where it displays the historical figures of various economic events.
From the chart, we can see that the inflation numbers have been on the rise in the past 12 months. To get a feel of how the actual print is going to look like compared to forecast, let’s look at the historical trend.
From the past 12 reports, 6 of them exceeded the forecast figure, 4 of them matched forecast while 2 of the actual numbers were lower than expected. We can then make an inference that the actual number is more likely to be greater than analysts’ forecast.
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BigWhale
Trader, Technical Analyst
