A further slowdown in the U.S. Consumer Price Index (CPI) may spark a bearish dollar reaction (bullish EUR/USD) as the majority of the Federal Open Market Committee (FOMC) remain in no rush to normalize monetary policy.
What’s Expected:
Why Is This Event Important:
Even though the Fed is widely expected to conclude its quantitative
easing (QE) program at the October 29 meeting, subdued price growth may
encourage the FOMC to retain the zero-interest rate policy (ZIRP) for an
extended period of time in order to promote a stronger recovery.
Easing input costs along with the slowdown in private-sector consumption
may spur a weak CPI print, and the EUR/USD may face a larger correction
over the near-term should the fundamental development drag on interest
rate expectations.
How To Trade This Event Risk
Bearish USD Trade: Headline & Core Inflation Continue to Undershoot
- Need to see green, five-minute candle following the release to consider a long trade on EURUSD
- If market reaction favors a bearish dollar trade, buy EURUSD with two separate position
- Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit; set reasonable limit
- Need green, five-minute candle to favor a short EURUSD trade
- Implement same setup as the bearish dollar trade, just in the opposite direction
Impact that the U.S. ISM Manufacturing report has had on EUR/USD during the last release
| Period | Data Released | Estimate | Actual | Pips Change (1 Hour post event ) | Pips Change (End of Day post event) |
|---|---|---|---|---|---|
| AUG 2014 |
9/17/2014 12:30 GMT | 1.9% | 1.7% | +1 | -93 |
August 2014 U.S. Consumer Price Index
EURUSD M5 : 24 pips price movement by USD - CPI news event
EURUSD M5: 38 pips price movement by USD - CPI news event
