US July CPI Inflation Data Preview & Forecast (12 August): Key to USD and gold's next moves — ATFX

[00:00:00] Speaker 1: this is probably the big data release of the week. Last week, we saw U.S. non-farm payrolls coming much weaker than expected. Saw some real pressure on rate high expectations from the Fed. So we're down to about 50-50 for the September meeting. Inflationary data in the U.S. is going to be a headline for the week in the form of the CPI numbers. Any deviations by even just a tiny amount from those expectations should see markets kick off. Hello and welcome to ATFX's U.S. CPI Data Trading Preview. As always, inflationary data in the U.S. is going to be a headline for the week and this is probably the big data release of the week. But in particular, this week, it takes on an even greater importance after last week's surprise shock non-farm payrolls number. So expected to come in around at 85,000, up came in at minus 23,000. Saw some real pressure on rate high expectations from the Fed. So we're down to about 50-50 for the September meeting, which is still a fair way away. If that's reinforced by a weaker inflation print from the CPI numbers, how's that going to see the dollar move? And we'll look at it against the euro. We'll look at dollar yen, which is very interesting as it has been for the last few weeks and months. And gold, of course, which is flying again. Let's have a look at the data we're expecting. Headline CPI numbers. We're expecting between a 0.1, 0.2% increase in the headline month or month number and the year-on-year 3.4. So that's the CPI numbers. The core one, which probably more closely was 0.2% increase expected for the core month or month and a 2.5% increase for the year-on-year. Anything probably 0.1% or certainly 0.2%, either side of those expectations should see some big moves in the market. So as I said, at the moment, we're close to 50-50 on the Fed in the September meeting. Plenty of water to come beneath the bridge before we get to that meeting and geopolitics are going to feature heavily. But if we do get weaker inflation tying in with those weaker job numbers, you've got to think that the Fed is really going to pull back on those inflationary expectations unless hostilities escalate hugely in the Gulf. I would say if we've got oil trading over $90, certainly trading back to $100, then we're probably going to see a more hawkish leaning from the Fed, whatever happens to this data. But if this data comes in and we're sort of sitting in this negotiation style in the middle of the Persian Gulf with the US and Iran, and this data comes in weaker again, expect those rate high expectations to pull back and the dollar and US yields to pull back with it. So without any further ado, I'm going to go and look at some key trading opportunities. We'll have a look at euro first, then dollar yen, and then gold. And so here's the euro dollar daily chart. Those familiar with what we're looking at, it's been relatively range-bound despite that lower dollar move that we got last week. I'll bring us into a little bit more closer focus. It's still kind of, sitting at the top of its recent range as the dollar's pulled back over recent moves, but still not breaking significantly. So I'll just bring us in. This is the move that we got after non-farms. We've kind of settled a little bit lower. So we reached a new high for the month up at 115.80. This 116 area is the target. If we get a lower print in the CPI, we will see the dollar sold and it should break higher. So now we've got trendline resistance coming around 115.75. As I said, 115.80. A break here opens the way probably to that 200-day move and average fairly clearly. And then we're a clear, if it's a very weak number, we're a clear move up probably to this 180. level. So good trading opportunity there for a weaker print in the euro. If we get a stronger print, that will really pull back those sort of like 50-50 chances. It'll probably see that we're going to be looking for a 25 basis point hike In September, expect the euro to crash down as the dollar moves up. We're probably going to be aiming, initial resistance is down here just under 114 figure. It's not too far away. It probably won't break that level in the first move, but it could certainly see breaks coming as we move through in the next quarters, especially if we see geopolitical concerns increase again. So euro, good trading opportunities. It's near good technical levels. And this offers traders, offers traders decent levels to leverage off, and they're strong on both sides. Let's go and have a look at dollar yen, and this is an interesting one. So here's the dollar yen chart. You'll be very familiar with this, and intervention has been rife, as we know, over the last few months. Here's the first one back in January. Here's the April one. And here's our most recent and most aggressive round of intervention that we saw from both the Bank of Japan and Fed. But once again, as you see, we hit a low down here, 155.21. Previous low back here in May, 155.02. We are back up 400 points. This was a sharp move yesterday. Came on the back of the increased escalation in the Gulf, but it does seem like that we've moved past and there hasn't been any further or smoothing moves from the Bank of Japan. So, mid-ranges, but expect big volatility in dollar yen. A stronger number. So we're looking at 0.3, 0.4 on the month-on-month numbers, up to like 3.5, 3.6 in the headline, 2.6, 2.7. It would take out. First stop was going to be this high that we saw back on the 31st. That's up just underneath 161. And then, of course, it's a big move back up here. If we do get sharp moves, do we get further intervention? That's where we could see massive volatility in dollar yen. So keep an eye on that. A weaker number would please the Bank of Japan and the Fed with it, you'd think, and we'll see us moving back down. Initial stock is probably going to be this low down here, 157.60. Support coming in now, 155.47. And, of course, this low down at 155.21. So, dollar yen, probably going to see the bigger moves in the foreign exchange market if we get a print away from those expectations. Could be very, very messy if it's a top side one. So, here's the gold chart, which most of you have been tuning in. And if you haven't, do subscribe to our channel. Probably should have said that earlier. But gold has had some really good moves recently. So, it's propelled itself nicely off these support levels down here. That trendline support will strengthen now as we've gone. Fantastic breakup just a few days ago last week. That was a big move. That was that 4% move back to the top side. It coincided with weaker dollar. And gold has generally been moving in line with the dollar for the last several months and not in line with geopolitical concerns. That's flipped the last couple of days because we've seen those concerns increase and gold has moved up. It's going to be very interesting to see what happens if we hit these levels. That's the 200-day moving average. That's the long-term resistance trendline all coming in about 4,500. Makes it a nice, easy package, doesn't it? So, stronger number. Expect gold to fall back initially. Support's now going to be coming all the way back down here. Probably this breakup level is 4,125. Longer-term support, 4,15. And then we're looking at these lows. It's just underneath 3,950. The interesting move is going to come if we get a weaker number to see if we can break through this big double resistance level, 4,500. Expect it to go soon. We've got a couple of sessions before. And knowing gold, we're probably going to be somewhere slightly different from where we are at the moment. And if we're close to this level, that could really give the gold balls a chance, especially if we get a weaker number. So, if we get a 0.1, if we get a 2.3, even a 2.4% on the core number, a 3.3, 3.2 on the headline number in the year-on-year, expect gold to move higher. And a break here really does open the way. First stop's probably going to be these highs we saw back in May, just underneath 4,800. Then we've got these ones in April, just underneath 4,900. And then, you know, then we're really opening the way to those all-time highs back up near 5,600 up there. So, plenty of opportunity in gold as well. It should be a big number. And as I said, the reason we're looking at this with an even greater focus is because of what we got last week with the jobs numbers. So, could really change those Fed rate hike expectations, but you have to take into account what's going on in the geopolitical situation at the same time. So, fascinating moves for markets. Could be some really strong moves on the back of it. Good luck with your trading. If you need anything from us for ATFX, please do let us know. Thank you.