Trading the News: U.S. Consumer Price Index

A downtick in the U.S. Consumer Price Index (CPI) may spark a more meaningful rebound in EUR/USD as it dampens the interest rate outlook for the world’s largest economy.

What’s Expected:

Why Is This Event Important:

It seems as though the Federal Open Market Committee (FOMC) is in no rush to normalize monetary policy as a growing number of central bank officials highlight the downside risk for inflation expectations, and a marked slowdown in price growth may undermine the bullish sentiment surrounding the greenback as central bank hawks Richard Fisher and Charles Plosser lose their vote in 2015.

How To Trade This Event Risk

Bearish USD Trade: U.S. CPI Slows to Annualized 1.6% or Lower

• 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

Bullish USD Trade: Headline & Core Price Growth Exceed Market Expectations

• Need green, five-minute candle to favor a short EURUSD trade
• Implement same setup as the bearish dollar trade, just in the opposite direction

Potential Price Targets For The Release
EUR/USD Daily Chart

• With the break of the monthly opening range, will watch former support on EUR/USD for new resistance.
• Interim Resistance: 1.2610 (61.8% expansion) to 1.2620 (50% retracement)
• Interim Support: 1.2280 (100% expansion) to 1.2300 pivot

Impact that the U.S. CPI report has had on EUR/USD during the last release


September 2014 U.S. Consumer Price Index
EURUSD M5: 38 pips price movement by USD - CPI news event :