US CPI Inflation Data Preview & Forecast (10 June): Key to USD and gold's next moves — ATFX #cpi

[00:00:00] Speaker 1: Last week, we saw a massive surprise in jobs numbers, really brought back to focus the fundamentals. This week's inflation data's turn, CPI could be a big mover for the market. Now we're about 75% priced in for a rate hike. Last time out, it was 3.8%, very, very sticky. Obviously, all these year-on-year numbers are well away from the Fed's target of 2%. If it comes in strong, reinforcing market expectations for a Fed rate hike, we could see the dollar really start to pick up and challenge annual lows. Hello and welcome to ATFX's US CPI data preview. This week, we've got key inflation numbers coming out. Again, CPI data and followed by PPI data, traders are going to be looking at during this week. And if we do get more sticky numbers, certainly it's really going to accelerate those plans for most of the market pricing in Fed rate hikes. Interestingly enough, Friday, we saw huge non-farm payroll numbers out of the US, really brought back to focus the fundamentals. Massive beat on non-farm payrolls. Unemployment came in steady. Average hourly earnings came in steady. But we saw a huge acceleration of dollar buying across the board. US yields went through the roof and big moves. Stocks obviously got hit as well because now we're about 75% priced in for a rate hike from the Fed before the end of the year and probably more to come. When obviously just a few short months ago, we were looking for when was the cut going to be coming. We were kind of pricing in September, maybe October. You've got Kevin Walsh coming in as the new Fed chair, who's kind of promised the guy in the White House that he's going to be cutting rates. It's going to be very difficult with that data that's just come out recently. What we're going to do today, we're going to have a look at the numbers. We're going to have a look at which ones are probably going to have the most impact that comes out on Wednesday in the US session. And we're going to check out trading possibilities on gold, on euro and on dollar yen. So, without any further ado, let's have a little look at the numbers. Obviously, two big numbers coming out, the CPI headline numbers and the core CPI. One-on-month CPI data expected to show a 0.5% increase. Year-on-year, 4.2%. Very, very sticky. This has obviously come around with energy prices going through the roof. Last time out, it was 3.8%. This time, 4.2%. Obviously, very, very high. The core numbers, so it takes out a little bit of the volatility that we'll see from some of the other data. Month-on-month, the core expected to come in 0.3%. That's actually lower than last time. 0.4% out last time. Year-on-year is creeping up a bit, up to 2.9% as opposed to 2.8% last time. Obviously, all these year-on-year numbers are well away from the Fed's target of 2%. So, how are we going to trade them? I think anything from the month-on-month numbers plus 0.1, 0.2, plus or minus, I should say, 0.1, 0.2, expect to see moves. Similar kind of parameters, I suppose, with the year-on-year numbers. It comes in on expectation. We probably go with the trend that we're in at the moment. We got those higher jobs numbers on Friday. Those numbers, as I said, are still sticky. They're away from the Fed's target at 2%. It probably means we do buy a dollar on dips, and maybe we see a continuation of this upward move. So, we're skewing towards the hawkish side for the Fed on most of what we're doing. We'll look at the charts with regard to that as well. But obviously, we could. So, without any further ado, let's go and see where there's a couple of trading opportunities out there. And if you haven't subscribed, of course, please hit that subscribe button. We'll try and keep you up to date as much as we can with what's going on in the market. So, here we've got the daily gold chart. Most of you that have been watching our videos will be very familiar with this. We did get that big move on Friday. And there you go. That's it coming down over 3%. Broken out of the ranges. We're now at multi-month lows. This is the yearly low down here at 4097.99. We're back up at 4321 at the moment. Long-term support now coming in around about 42.22. So, interesting levels that we're trading at here. I've kept that downside. Was support trend line in there. It will probably be the first level of resistance on the top side. And as you can see now, we are trading comfortably underneath that 200-day moving average. So, all things being equal, in a few sessions' time, we're trading here. Stronger numbers, which we kind of think that expect these levels to be challenged. And I have to reiterate, gold is trading firmly in line with US yields, firmly in line with the dollar at the moment. The safe haven qualities have fallen off over the last few months, despite what's going on in the Middle East and in the Gulf. So, expect this to move on those dollar numbers. So, we start seeing things, higher numbers, a 0.4%, a 0.6% for the headline numbers, 4.3%, 4.4% for the year-on-year data. Expect that dollar to appreciate. We should see these levels challenged. If we do get a break, it really does open the way. Once we've broken through these previous lows, it really does open the way for a move much further south over longer term, as the dollar looks to appreciate. Conversely, of course, we could see weaker numbers come through. We could see a 0.1 on the core number. A 0.2 or a 0.3, that should see gold rally. First level, as I said, is just above here, so not too far away. 200-day moving average at $44.50-ish. And then, strong long-term resistance around about $4,500 an ounce. So, plenty of potential. And gold does tend to move. We are seeing big percentage moves in gold, bigger than some of the currencies. So, as I said on Friday, we saw a 3% move in gold. It makes sense, right, because the numbers are so big. So, gold potentially big moves coming up on Wednesday. We'll jot over to the single currency, euro now, and have a little look how that's looking on the daily chart. So, here we are, daily chart for euro. Once again, I've kept that previous support line that we had in there. We broke through strongly last night. Sorry, on Friday, we had another little dip yesterday. We kind of bounced a little bit on the positive news out of the Gulf. But we're sitting here. As you can see, we based out here just around the $1.15 level. We had lows here prior. Back in April, early April, you see a few lows there. Really, the target will be down here just above $1.14, the figure. Stronger numbers should see us attack those levels. After that, it's a big, big dip move down. Here we go. Look, we've got lows down here about $1.12. And then probably the next key is the psychological level down here. So, we're talking big moves, but this could be a big change in dollar direction and Fed estimates. So, I'll bring it in here. Obviously, weaker numbers. I feel we're going to see a move back up to initial resistance, round about where that former support line was, round about $1.16. Higher up, we've got 200-day moving average coming in at $1.16.78. And that's tying in with the longer-term resistance just above $1.17, the figure. So, big potential moves for euro as well. We'll now go and deal with the final one we're going to have a look at, which could be very tricky. So, here we are on the dollar-yen chart, daily chart here. I will bring it in a little bit close. As we know, dollar-yen has gone flying from mid last year all the way up from these $1.42 levels. We've peaked out a few times, but we have seen official action from the Japanese authorities. This is it back in April. You can see a 2.4% decrease on the day they hit it again here. And we are back up near these sticky levels, above $1.60. So, keep an eye on this. A stronger number could see us challenge these levels. It's a tricky trade because they are high at $1.60.72. We've kind of got the resistance trend line around about that level as well. But if you look at the hourly charts, which I can't bring up at the moment, but if you look at the hourly charts, it does seem to be some official levels in where there may be a bit of smoothing action going on. What could happen is stronger numbers. We take out these levels, but keep an eye on, have a very, very strong risk management profile on what you're doing because intervention could come in and you could see a nasty move like this. So, weaker number gives the BOJ a little bit of a hand. Breaker this trend line support. These previous lows, it does open the way for a move back towards these sort of 158 levels and then next support line coming in around about 156.50. So, all good opportunities. Gold, expect percentage moves out of that. Euro, expect good moves on that as well. Dollar Yen, interesting play. If you're going to play it from the long side, be aware we could see action from the Japanese authorities afterwards. So, maybe trailing stops on that one. So, plenty of opportunity coming out. As I said, most of the market's leaning towards us having these sticky numbers coming through, reinforcing strong jobs numbers and locking in Fed rate hikes before the end of the year. Good luck with your trading. If you need anything from us, please do let us know. Thanks very much. Thank you.