How Do We Make Money Today?
OK traders it’s time to dust off your trade plan and brush the cobwebs from your capital management system because we’ve got the high impacting US CPI data today.
This is the main game and has the potential to shape direction for the USD for the coming months.
It also has the potential to once again debuckle the US Equity & Treasury markets. So it’s BIG & very important & all major currency pairs will be in play!
CPI M/M +0.3%
CPI Y/Y 1.9%
Impact of Stronger numbers
If we get a higher print above 2.0% Y/Y and a higher M/M number then the USD should rally through the roof.
Stronger numbers could potentially lead to the market factoring in 4 rate hikes by the FED in 2018 (currently forecast at 3) & that’s USD bullish.
You could expect the AUD, NZD, EUR & GBP to come off and USDJPY, USDCHF & USDCAD to rally.
BUT there are other possible implications and this is where it gets tricky.
Stronger inflation will put upward pressure on US Treasury yields and this could create downside panic on the equity markets.
If the equities do go into panic mode then I’ll be looking to BUY YEN & CHF. i.e. flight to safety.
Risk OFF environment usually sees the commodity currencies hit the hardest: thats AUD, NZD & CAD.
Impact of Weaker numbers
If we get a lower print below 1.8% Y/Y and a lower M/M number then the USD should fall through the floor.
Weaker numbers will definitely rule out 4 potential rate hikes for the FED in 2018 and if they are really weak it could mean winding back the forecast from 3 hikes to just 2 & that’s USD bearish.
A weaker number would also potentially alleviate some of the pressure off the US Treasuries and we should see US equity markets rally aggressively.
You could expect the AUD, NZD, EUR & GBP to rally and USDJPY, USDCHF & USDCAD to fall.
Risk ON environment usually sees the commodity currencies rally the hardest: thats AUD, NZD & CAD.
Prepare for the Release
You really want to get yourself fine tuned for the release. Focus on the major pairs with the best technical set ups and work out how you’re going to execute the trades.
This is pay day …so make sure your are adequately prepared – i.e. you have the right tools to get the job done! (T-Rex & Reuters Xenith)
It’s massively important you don’t over l;everage the opportunity although I know it’s tempting.
If you’re not sure how much to trade, just think of how much you can afford to lose. If you’re a Pro your capital managment system will determine this for you.
IMPORTANT: Since this release has massive implications for US interest rates, US Treasuries & Equities you can expect liquidity to disappear right on the release.
So going in with ‘close’ pending orders is a recipe for a nasty result.
Trading live is the way to go. You have absolute control of your risk. You may miss the first 20-30 pips but don’t worry about that. Look for retracements or if they’re massive numbers (unlikely) then just get in where you can…ideally around technical levels.
It’s going to be the wild west …. think quick and react …any hesitation & the opportunity will be gone.
Good Luck traders ….. may the force be with you!
Trading Pairs to Focus On
AUDUSD, NZDUSD, USDJPY, EURUSD, GBPUSD, USDCHF, USDCAD
Check our Next Best Trades list for full details as to why these pairs are in focus.
Technical Set Up – What’s Happening with the Majors
Check our Daily Analysis for detailed analysis of the Major currency pairs.
Today’s Fundamental Drivers
Plan the Trade, Trade the Plan!
The idea of our “Market Insight” is to give you some guidance into your daily preparation.
Your Daily Analysis needs to become habitual.
Make sure you don’t waste unnecessary time in front of the screens.
Remember you need to be fresh, confident and ready to trade and by sitting aimlessly in front of your screens you will become stale and uncertain.
The key to your sucess: Isolate the opportunities that work for you and focus on them.
Don’t worry about things that you can’t make…..chasing them will only cause problems (tiredness & irrational behaviour will take over).
Tune up your charts & get ready to trade…..see you in the 247 Trade Zone!