Will we see another rise in US CPI this week?

Inflation will be in the spotlight again this week. Learn what you need to know about this important macroeconomic development below. Market and Fed they still focus on inflation, so tomorrow's data will be another key point for monetary policy. We already know that the Fed is urgently seeking a quick return to a neutral level of interest rates. Headline inflation is expected to amount to 8,5% y / y and core inflation to 6,6% y / y (excluding variable components such as food and energy, which allows for a more accurate reading of inflationary pressure). The increase in energy prices will be a decisive factor in the amount of the headline index. Could this be the peak of inflation, however, as unfavorable base effects are starting to break through?

Inflation, interest rates and the FED

Also, as the report is published, I will look at how broad inflation is, not how isolated it is from a few specific categories. Currently, the market sees a very good chance for a 50 bp rate hike at the May meeting (valued at 47 bp) and around 225 bp until the end of 2022. Yield of 10-year bonds in the US continues to rise and currently hovers around 2,75%. I believe that with how fully STIRs are currently priced there is some risk to the greenback. A smaller deviation from the par could trigger a sale, while a significant breakthrough would be necessary to see any gains, if any. Assets that are most sensitive to this data are major dollar crosses such as EURUSD, GBPUSD, USDJPY (especially), gold and NASDAQ100.

EURUSD

EURUSD increased slightly as Macron fared slightly better than expected in the first round elections in France. It is possible that we are dealing with a double bottom and there is some negative divergence in the chart, which would be music for the bulls. The price is just above the bottom trendline of the downtrend channel. Upwards of 1.10 near the 21-day EMA average is likely to act as resistance, downwards of 1.09 and the previous low of 1.08 will be key areas.

Source: TradingView - Past Performance is not a guide to future performance

GBPUSD

The GBPUSD rebounded from the key swing low level of 1,30. It looks like a double bottom is forming, as is the case with EURUSD, as well as a negative RSI divergence. The 23,6% Fibonacci level and the 21-day EMA are places where the bulls seem to find a stable resistance. The level of 1,30 is definitely the level to watch for the downward trend.

Source: TradingView - Past Performance is not a guide to future performance

USDJPY

The yen dollar rises sharply, breaking the previous high, and is currently trading in the mid-125 range. This is quite a clear signal for US profitability. We've returned to the 2015 highs, yet the RSI indicator is no longer as overbought as it was at the previous high at the end of March. This is definitely an impulse trade and you should stay very agile. Is level 130 possible?

Source: TradingView - Past Performance is not a guide to future performance

Gold

Gold broke through its fluctuation range despite rising real yields. The next level to be observed is the 38,2% Fibonacci level to see if the bulls can also beat this zone. The growing 50-day SMA keeps the uptrend intact. The RSI indicator is approaching the level of 62,8, where it previously had problems prior to the invasion.

Source: TradingView - Past Performance is not a guide to future performance

NASDAQ100

The high-tech sector is struggling with higher profitability and is currently on its 50-day SMA after being rejected for the 200-day SMA. The RSI indicator has some room left before it can be considered oversold and we may see a downward move to 14k. or we will trade between 50 days SMA and 200 days SMA. 

Source: TradingView - Past Performance is not a guide to future performance

About the author

Luke Suddards - is a research strategist that generates valuable insights for a growing customer base Pepperstone through unique analysis, trading ideas and risk management strategies. Luke earned a BA in Economics and Finance, followed by a Postgraduate Honors in Finance with a cum laude degree. His academic background and numerous internships in the financial sector have provided him with a broad and solid understanding of the financial markets.

Luke started his own market analysis and financial education company that dealt with multi-asset analysis for retail and institutional clients. After writing his own book on technical analysis and developing trading strategies, Luke knows how to use technical analysis tools to maximize his trading success. His style of analysis can best be described as a hybrid event-driven fundamental and technical strategy.

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